NWG — NatWest Group plc

Summary of NatWest Group (NWG) Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Customer Lending: Grew 6.6% year-on-year to GBP 400 billion, with GBP 7.3 billion growth in Q1, including GBP 3.3 billion in mortgages and GBP 3.8 billion in Commercial & Institutional (C&I).
• Customer Deposits: Increased 2.6% to GBP 445 billion, with a GBP 3.1 billion rise in Q1, despite expected seasonal tax-related outflows.
• Income: Grew 6.9% to GBP 4.2 billion; however, income excluding notable items fell 1.1% quarter-on-quarter.
• Costs: Up 4.8% year-on-year to GBP 2 billion, with a cost/income ratio improved to 46.5%, down 2.1 percentage points.
• Return on Tangible Equity (RoTE): Remained strong at 18.2%, with earnings per share up 15.5% to 17.9p.
• Common Equity Tier 1 (CET1) Ratio: Strong at 14.3%, with capital generation of 65 basis points in Q1.

2. Strategic Updates and Business Highlights

• Retail Banking: Increased mortgage market share and partnered with Rightmove as an exclusive mortgage provider.
• Private Banking & Wealth Management: Progressing with the acquisition of Evelyn Partners, expected to complete in Q2 2026.
• Commercial & Institutional: Onboarded 24,000 new start-ups, a 25% increase year-on-year, indicating strong demand.
• Cost Savings: Achieved over GBP 100 million in additional cost savings in Q1 through simplification efforts.
• Technology Investments: Over 40% of code is now written by AI, enhancing productivity in software development.

3. Forward Guidance and Outlook

• Income Guidance: Revised to the top end of GBP 17.2 billion to GBP 17.6 billion range for the year, reflecting strong Q1 performance and higher interest rate assumptions.
• Economic Outlook: Anticipates higher inflation and interest rates remaining at 3.75% for the year, leading to slower economic growth and a modest rise in unemployment.
• Loan Impairment Expectations: Maintained guidance for loan impairment rates below 25 basis points for 2026, despite taking an additional provision of GBP 140 million in Q1 due to revised economic scenarios.

4. Bad News, Challenges, or Points of Concern

• Geopolitical Risks: Increased uncertainty due to conflict in the Middle East, although no immediate impact on customers was reported.
• Economic Conditions: Revised economic scenarios indicate slower growth and rising unemployment, which could affect loan demand.
• Mortgage Spread Pressure: Anticipated downward pressure on mortgage margins due to the roll-off of higher-rate COVID-era mortgages.
• Competition in Deposits: Intense competition in the ISA and cash deposit markets, with some peers offering negative spreads.

5. Notable Q&A Insights

• Loan and Deposit Growth: Management highlighted strong, broad-based growth in lending, particularly in C&I, with a robust pipeline for future quarters.
• Deposit Margin Dynamics: The sequential contribution to deposit margins was softer, attributed to tax outflows and competitive pressures, but management expects improvement in future quarters.
• Refinancing Risks: Customers are actively managing refinancing options amid interest rate volatility, with a shift towards shorter-term products observed.
• Confidence in Credit Models: Management expressed confidence in their ECL models, indicating that even in adverse scenarios, the expected credit losses would remain manageable.

Overall, NatWest Group demonstrated strong performance in Q1 2026, with positive growth metrics and strategic initiatives in place, while also acknowledging potential economic headwinds and competitive pressures.