NatWest Group (NYSE:NWG) raised its 2026 return guidance after reporting continued income growth, operating leverage and capital generation in the first half, while completing its acquisition of wealth manager Evelyn Partners.
Chief Executive Officer Paul Thwaite said the bank’s return on tangible equity reached 19.7% in the first half, which he described as industry leading. Earnings per share rose 23% to 38 pence, while the interim dividend increased 26% to 12 pence. Tangible net asset value per share rose 13%, excluding the impact of the Evelyn Partners acquisition.
Income outpaced costs
For the second quarter, income excluding notable items increased 5.4% from the first quarter to £4.4 billion. Total operating costs rose 1.8% to £2.1 billion, producing a one-percentage-point sequential improvement in the cost-income ratio to 45.5%.
Second-quarter operating profit increased 12.4% to £2.3 billion, while profit attributable to ordinary shareholders was £1.6 billion. Quarterly return on tangible equity was 21%.
Net interest margin was 249 basis points, up 2 basis points from the first quarter. Chief Financial Officer Katie Murray said a 4-basis-point improvement in deposit margin and a 2-basis-point benefit from funding were partly offset by a 4-basis-point decline in lending margin.
Murray said lending-margin pressure reflected the mix of growth in lower-risk, high-return but lower-margin categories, including mortgages and commercial and institutional lending. She added that the bank expects net interest margin to be “a little flatter” in the second half, although lending volumes are expected to support higher net interest income.
Non-interest income rose 15%, or £124 million, in the quarter, aided by customer activity in Commercial and Institutional and higher insurance fee income. Murray said £45 million of insurance income related to accelerated recognition associated with a transition to a new insurance provider and would not recur.
- Full-year income excluding notable items is expected to be about £17.9 billion.
- Other operating expenses are expected to be about £8.5 billion, including roughly £300 million from Evelyn Partners.
- The bank delivered £250 million of gross cost savings in the first half.
Customer balances and wealth assets increased
Customer assets and liabilities, or CAL, increased by £86.8 billion during the second quarter to £986.9 billion. The increase included £9.7 billion of customer lending growth, £2.8 billion of deposit growth and a £73.9 billion increase in assets under management and administration, including Evelyn Partners.
Retail Banking and Private Banking & Wealth Management lending increased £4 billion, primarily driven by £3.9 billion of mortgage growth. NatWest’s mortgage stock share edged up to 12.7%, supported by record applications in March, according to Murray.
Commercial and Institutional lending rose £5.7 billion, or 3.6%, during the quarter. Thwaite said demand remained resilient across infrastructure, social housing, technology-related lending, funds lending, the mid-market and business banking. He said the bank did not need to change its risk appetite to support growth.
Deposits grew mainly in Commercial and Institutional, where balances increased £2.5 billion. Retail deposits were stable as customers shifted toward fixed- and variable-rate ISAs. Thwaite said the bank is focused on deposits that deepen customer relationships rather than pursuing “hot money.”
Assets under management and administration ended the quarter at £130.6 billion. The total included £71.7 billion added through Evelyn Partners, partly offset by a £4 billion reduction following the sale of Cushon in May. Excluding both transactions, assets rose £6.2 billion, including £5.1 billion from market performance and £1.4 billion of net inflows.
NatWest’s private banking and wealth business recorded £2 billion of net inflows before the Evelyn acquisition, a record result that represented a 33% increase from the prior year. The bank said more than 45,000 customers invested with it for the first time during the period.
Evelyn Partners integration underway
Thwaite said the Evelyn Partners acquisition had been completed and gives NatWest a larger presence in the U.K. wealth market. The transaction increased the group’s assets under management and administration by more than 150% to £131 billion on a first-half basis.
One month after completion, Evelyn Partners was performing in line with expectations and integration was proceeding as planned, Thwaite said. The combined business is operating under a single leadership team led by Emma Crystal, and NatWest has formed an integrated financial planning team. Thwaite said the company was already seeing referrals in both directions between its existing operations and Evelyn Partners.
Murray said Evelyn Partners is expected to contribute around £275 million of income in the second half.
Capital generation and credit outlook
The bank reported a common equity tier 1 ratio of 13.2% after the Evelyn acquisition and after accruing 50% of attributable profit for ordinary dividend payments. Its CET1 ratio was 14% before distributions.
NatWest generated 197 basis points of CET1 capital from earnings in the first half, including a 31-basis-point benefit from risk-weighted asset management. The Evelyn Partners acquisition used 142 basis points of capital. Organic lending growth consumed 61 basis points, while investment spending consumed 19 basis points.
For 2026, the company expects capital generation before distributions and before the impact of Evelyn Partners to exceed 240 basis points. NatWest continues to target a CET1 ratio of around 13%, though Murray said the bank would be comfortable reporting a ratio with a 12% handle given the point-in-time nature of the measure.
Credit performance remained stable. The second-quarter impairment charge was £140 million, equivalent to 13 basis points of loans. Murray said the bank saw no new signs of stress across its businesses and continues to expect a 2026 loan impairment rate below 25 basis points.
About NatWest Group (NYSE:NWG)
NatWest Group plc is a major UK-based banking and financial services group headquartered in Edinburgh, Scotland. The company traces its roots to the Royal Bank of Scotland, founded in 1727, and adopted the NatWest Group name in 2020 as part of a strategic refocus on its NatWest brand. NatWest Group is listed on the London Stock Exchange and also has American depositary shares trading on the New York Stock Exchange under the symbol NWG.
The group provides a broad range of banking services across retail, private, commercial, corporate and institutional segments.
