NatWest Group LON:NWG has upgraded its earnings outlook for the year after reporting another robust quarter of growth, supported by resilient customer activity, stable deposits and tighter cost controls.
The state-backed lender posted an attributable profit of £1.6bn for the three months to the end of September, up from £1.4bn a year earlier, as income excluding notable items rose to £4.2bn. Return on tangible equity — a key measure of profitability — reached 22.3 per cent, well ahead of the bank’s medium-term target.
The figures highlight how the UK’s biggest high street banks are continuing to benefit from steady demand for loans and disciplined balance-sheet management despite an uncertain economic backdrop. While the interest rate cycle has largely peaked, NatWest said customer activity remained healthy across its retail, commercial and institutional divisions, helping to sustain momentum into the final quarter of the year.
NatWest reports net lening up by over £4bn
Net lending to customers increased by £4.4bn during the quarter, excluding central items, as demand held firm across mortgage and business lending. Deposits were broadly stable, falling slightly by £1.1bn, while the bank’s loan-to-deposit ratio edged higher to 88 per cent. Liquidity remained strong, with a coverage ratio of 148 per cent.
Assets under management and administration also expanded sharply, rising 8.1 per cent to £56bn, boosted by client inflows into the group’s investment and wealth businesses.
- Could UK banks become fiscal fodder for Reeves’ Budget?
- Revolut’s elusive UK banking license
- HSBC proposes privatisation of Hong Kong’s Hang Seng Bank
NatWest said its focus on simplification and digital transformation was continuing to deliver efficiencies, with its cost-to-income ratio — excluding litigation and conduct charges — improving to 47.8 per cent in the year to date, down five percentage points from the same period in 2024. The bank has invested heavily in technology to streamline operations and reduce legacy complexity, while cutting back-office expenses to offset inflationary pressures.
Active balance-sheet management helped release additional capital capacity. The bank reported a £2.2bn benefit from risk-weighted asset optimisation in the quarter, equivalent to 101 basis points of capital generation before distributions. Its Common Equity Tier 1 ratio, a key measure of financial strength, rose to 14.2 per cent, up 60 basis points from both the fourth quarter of 2024 and the previous quarter. Tangible net asset value per share climbed by 11 pence to 362 pence.
NatWest doubling down on SME lending
Chief executive Paul Thwaite said the results reflected consistent delivery across all businesses and an improved ability to support customers through economic uncertainty. The bank has sought to reinforce its position as a leading lender to small and mid-sized enterprises, while maintaining a significant presence in corporate and institutional banking.
NatWest now expects full-year income, excluding notable items, to be about £16.3bn in 2025, compared with its previous forecast of £16bn. It also raised its target for return on tangible equity to above 18 per cent for the year, citing solid capital generation and continued discipline on costs.
The bank said it would introduce guidance for 2026 and new financial targets for 2028 alongside its full-year results in February.
What do we think?
While macroeconomic conditions remain uncertain and competitive pressures in retail banking are intensifying, the group’s strengthened guidance suggests management confidence in sustaining earnings momentum into next year. The Armchair Trader feels the results position NatWest favourably among UK peers as the sector transitions from a period of interest-rate windfalls to a more stable, efficiency-driven growth model.
