NWG — NatWest Group plc

Summary of NatWest Group Q3 2025 Earnings Call

1. Key Financial Results and Metrics

• Lending Growth: Increased by 4.4% year-to-date to GBP 388 billion, consistent with a six-year annual growth rate of over 4%.
• Income: Total income reached GBP 12.1 billion, up 12.5% year-on-year. Q3 income (excluding notable items) rose 3.9% to GBP 4.2 billion.
• Operating Profit: GBP 5.8 billion for the first nine months; Q3 operating profit before tax was GBP 2.2 billion.
• Attributable Profit: GBP 4.1 billion year-to-date, with Q3 attributable profit of GBP 1.6 billion.
• Return on Tangible Equity (RoTE): 19.5% year-to-date, with Q3 RoTE at 22.3%.
• Cost/Income Ratio: Improved by 5 percentage points to 47.8%.
• Common Equity Tier 1 (CET1) Ratio: Ended Q3 at 14.2%, up 60 basis points from Q2.

2. Strategic Updates and Business Highlights

• Customer Growth: Attracted 70,000 new customers in Q3, with significant growth in mortgage lending (GBP 5 billion) and unsecured lending (GBP 2.9 billion or 17.3%).
• Sustainable Finance: Delivered GBP 7.6 billion towards a 2030 climate finance target of GBP 200 billion.
• Asset Management: Assets under management grew 14.5% to GBP 56 billion, contributing to noninterest income growth.
• Integration Progress: Successfully integrated Sainsbury's customers into the NatWest app, enhancing customer experience.

3. Forward Guidance and Outlook

• Revised Income Guidance: Full-year income expected to be around GBP 16.3 billion, with RoTE projected to exceed 18%.
• Cost Management: Operating expenses are anticipated to be around GBP 8 billion for the full year, with an additional GBP 100 million for one-time integration costs.
• Lending and Deposit Trends: Continued confidence in lending growth, with expectations of stable deposit balances despite some outflows in retail fixed-term accounts.

4. Bad News, Challenges, or Points of Concern

• Deposit Outflows: Notable outflows in retail fixed-term accounts due to large maturities, which may continue into Q4 but are not expected to be as significant.
• Competitive Pressures: Intense competition in the mortgage market is putting pressure on margins.
• Regulatory Changes: Anticipated impacts from CRD4 and Basel 3.1 regulations could affect capital requirements and risk-weighted assets.

5. Notable Q&A Insights

• Deposit Strategy: Management emphasized a balanced approach to managing deposits, focusing on value and retention rates, which are currently around 80-85%.
• Noninterest Income Growth: Strong performance in cards, payments, and capital markets, with ongoing focus on enhancing fee income.
• Cost Management Outlook: While costs are expected to grow, management is confident in maintaining a disciplined cost structure alongside simplification initiatives.
• Future Capital Returns: Discussions around potential increases in dividend payout ratios were noted, although no immediate changes were announced.
• Structural Hedge Duration: Management is comfortable with the current hedge duration of 2.5 years, citing no immediate need for extension based on customer behavior.

Overall, NatWest Group reported a strong performance in Q3 2025, with solid growth across lending and income, while also addressing challenges in competitive pressures and regulatory impacts. The outlook remains positive with revised guidance and strategic initiatives in place to sustain growth.