NatWest reported first-quarter income of £4.4bn (£4.3bn expected), up 10% year-on-year. Net interest margin rose from 2.27% to 2.47%.
Operating profit rose 12% to £2.0bn (£1.9bn expected), supported by strong top-line growth and good cost discipline. Impairments were higher, driven by weakening economic assumptions, but in line with expectations, and default levels remain low.
The group’s CET1 ratio, a key measure of financial strength, was 14.3% at the period end (target = around 13%).
2026 guidance now points to total income at the top end of the previous £17.2-17.6bn range (£17.7bn expected), excluding any benefits from the upcoming Evelyn Partners acquisition.
The shares rose 2.9% in early trading.
Our view
NatWest delivered a decent set of results, but guidance took centre stage. Income and operating profit beat expectations, returns remain healthy, and capital is in good shape, but the 2026 income outlook was a touch below consensus. We don’t see that as a sign of weakening momentum, with loan growth, deposits and margins all pointing to a business that’s holding up well, and NatWest has a track record of guiding cautiously.
As a traditional lender, loan default rates are an important risk to watch for. Impairments were higher this quarter, but that was driven by updated economic assumptions rather than any issues with borrowers. Default levels remain low, and the loan book remains resilient.
Loan growth was one of the brighter spots, with momentum across mortgages and enterprise lending. That supports the view that NatWest is still winning business, and management commentary points to a healthy pipeline into the next couple of quarters. For a bank trying to grow more actively after years of balance-sheet restraint, that is encouraging.
The mortgage margin story is playing out as expected. There is still some pressure as higher-margin Covid-era lending rolls off, but new business is being written at good levels. That suggests pricing pressure is not getting worse, and it sets up a more stable picture into 2027 once that roll-off headwind fades.
There were some moving parts on the deposit side in the quarter just gone, but they still grew, suggesting NatWest is doing a good job of retaining and attracting customer money - even as competition for savings remains elevated.
There’s also the benefit of the structural hedge - think of this as a bond portfolio that gradually rolls on to better rates over time. NatWest now expects this to add around £1.5bn of income in 2026 and another £1bn in 2027, with further annual growth expected out to 2030. This is perhaps the key driver of growth in the coming years.
Costs remain a key focus, and we’ve been pleased to see continued progress. NatWest is ahead of peers in this respect, and it's an important part of the investment case, but it also means execution needs to stay sharp as the bank continues to invest and simplify.
All in, we see NatWest as one of the best-placed UK banks to benefit from several sector tailwinds. Sentiment has rightly improved in recent years after a lengthy period at depressed levels. We think that’s justified and see scope for continued growth, but there’s a growing risk of slower economic growth for investors to be wary of.
Environmental, social and governance (ESG) risk
The financials sector is medium-risk in terms of ESG. Product governance is the largest risk for most companies, especially those in the US and Europe with enhanced regulatory scrutiny. Data privacy and security are also an increasingly important risk for banks and diversified financial firms. Business ethics, ESG integration and labour relations are also worth monitoring.
According to Sustainalytics, NatWest’s management of material ESG issues is strong.
NatWest is resolving some longstanding issues but still faces legal challenges and subpar money laundering policies. Its product management lacks detail and oversight, posing risks under new consumer protection laws. Although there are gaps in data privacy and security, NatWest effectively mitigates cyber threats.
NatWest key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.