NatWest Group plc

NatWest reported Q2 income excluding notable items of GBP 4.4 billion, up 5.4% quarter on quarter, with total operating costs of GBP 2.1 billion, up 1.8%, and a cost-income ratio of 45.5%. Q2 impairment charges were GBP 140 million, equal to 13 basis points of loans, operating profit rose 12.4% to GBP 2.3 billion, profit attributable to ordinary shareholders was GBP 1.6 billion, and ROTE was 21%. For the first half, CET1 was 13.2% after the Evelyn Partners acquisition, capital generation was 197 basis points, and the cost-to-income ratio was 46%. Management now expects full-year 2026 income excluding notable items of around GBP 17.9 billion, other operating expenses of around GBP 8.5 billion, capital generation before distributions and the impact of Evelyn Partners of more than 240 basis points, and ROTE of more than 19%. They also reiterated expected 2026 loan impairment rate below 25 basis points and said the next buyback is expected with full-year results in February.

Katie Murray framed the half as evidence that NatWest has built a large-scale bank with momentum in customer growth, efficiency and returns. She emphasized broad-based growth across the three businesses, the completed Evelyn Partners acquisition, and progress toward the 2028 targets. Her tone was confident and constructive, saying the bank has the capacity to grow at scale and deliver strong, compounding sustainable returns through the cycle.

Katie Murray and Donal Quaid focused on strong operating leverage, capital generation and a well-funded balance sheet. Murray highlighted 8.9% income growth versus 4.5% cost growth, 137 basis points of capital generation in the quarter, and a CET1 ratio of 13.2% after Evelyn Partners; Quaid added that H1 CET1 generation was 197 basis points, with 31 basis points from RWA management, and that 2026 capital generation before distributions is now expected to be more than 240 basis points. Quaid also noted strong liquidity and funding metrics, including an average LCR of 140%, an NSFR of 132%, primary liquidity of GBP 152 billion, and a loan-to-deposit ratio of 90%.

Analysts focused on the July financial stability review proposals, covered bond funding, the remaining 2026 issuance mix, and whether stronger capital generation would reduce AT1 and Tier 2 needs. Management said the FSR direction was welcome, but there has been no change to capital requirements yet; the leverage proposal would not create day-one benefit because risk-weighted assets remain the binding constraint, while possible buffer usability and O-SII changes were not expected to alter the near-term CET1 target. On funding, Donal Quaid said the bank expects to remain active in MREL in H2, likely complete the remaining AT1 optionality only if needed, and has likely finished Tier 2 issuance for the year; he also said the successful GBP 1 billion covered bond deal makes covered bonds more likely to become a core funding tool over time. On the U.S. investor question, he said the longer-dated '21 non-call '20 dollar Tier 2 worked well on spread and issuance terms, and the bank is open to more longer-duration issuance if demand supports it.