NatWest Group (NWG) is one of the largest retail and commercial banks in the UK, serving more than 19 million customers across personal banking, small business, commercial clients, and wealth management. Its operations include Ulster Bank in Northern Ireland and a growing digital channel through NatWest Digital. This broad footprint gives the group a strong base of low-cost deposits and recurring fee income.
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The company focuses on three goals, including higher returns, stable costs, and balanced lending. Company management continues to improve operating efficiency through digital adoption and lower branch costs. The shift to a simpler model supports higher returns on equity and stronger capital. This helps the bank stay competitive in a crowded UK market.
NatWest also continues to adjust to a changing interest rate environment. Higher rates supported margins in 2023 and 2024. Rates are now normalising, so the bank is shifting toward fee growth and improved customer retention. The mix between secured lending, cards, and commercial activity helps reduce reliance on any single source of income. These adjustments give the company a clearer path to stable, long-term earnings.
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Financial Story
The most recent Q3 2025 results show steady improvement. Operating profit reached £1.85 billion, up from £1.63 billion last year. Total income rose due to higher net interest income and stable fee generation. The net interest margin is 2.92 percent, reflecting strong deposit pricing and disciplined asset growth. The bank kept impairment charges controlled as credit quality remained solid.
| Metric | Q3 2025 | YoY Change | Notes |
|---|---|---|---|
| Operating profit | £1.85B | Up | Higher income and stable costs |
| Total income | £3.66B | Up | Margin strength and fee stability |
| Net interest margin | 2.92 percent | Slightly lower | Stable deposit pricing |
| Operating expenses | £1.76B | Down 2 percent | Efficiency gains |
| Impairment charge | £185M | Stable | Good credit performance |
| CET1 ratio | 14.6 percent | Higher | Strong capital generation |
| Return on tangible equity | 16.2 percent | Up | Improved profitability |
| Customer deposits | £434B | Slight increase | Stable customer behaviour |
Costs remained a key focus as operating expenses fell by 2% year on year following staff reductions and branch optimisation. Technology spending stayed stable. This created positive operating leverage. The cost-to-income ratio improved to 48 percent. The better ratio reflects both income growth and lower support costs.
Capital strength improved. The CET1 ratio rose to 14.6 percent. Strong internal capital generation supported this gain. NatWest continued to distribute capital through dividends and buybacks. The bank remains committed to returning surplus capital to shareholders. The capital position supports lending growth and cushions against economic uncertainty.
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Broader Market Context
The UK banking sector is adjusting to normalising rates, slower mortgage demand, and strong competition in deposits. These shifts create pressure on margins, yet they also reward banks with strong customer loyalty and low operational costs. NatWest fits this profile due to its large retail base and digital reach.
Credit conditions remain stable across the UK as household finances improved, with wage growth staying positive. Business lending is stable but selective. These trends help banks manage impairments. The environment still presents risk due to slower GDP growth and higher living costs. This means risk management remains central to the outlook.
1. Income Growth Driven by Strong Margins and Customer Activity
NatWest continues to benefit from a solid net interest margin supported by disciplined deposit pricing. The bank maintains a large base of low-cost current accounts that cushion income as the rate cycle shifts. Fee income stayed steady due to card activity and payment services. These factors help the bank generate stable revenue even as mortgage demand slows.
Lending remains balanced across mortgages, cards, and business activity. Business lending grew at a measured pace, supported by stable credit conditions. Consumer card spending increased and diversified the income mix. This balance reduces reliance on mortgages and gives the bank a more predictable earnings base. The broader mix also helps the bank adjust more smoothly to changes in customer behaviour.
2. Cost Efficiency Supports Return on Equity
NatWest continues to reduce costs by pushing more customer activity into digital channels. Staff reductions, branch consolidation, and tighter support spending helped lower operating expenses. The cost-to-income ratio improved again, demonstrating the benefit of a simpler operating model. These steps give the bank a stronger foundation as competition increases.
Technology spending remains consistent and targets long-term efficiency gains. The investment focuses on fraud controls, risk systems, and improved digital journeys. These upgrades help the bank reduce manual processes and improve customer retention. The improvements support higher returns and help offset margin pressure from changing rate conditions. This approach keeps the operating model flexible as customer expectations evolve.
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3. Capital Strength Provides Flexibility and Stability
BMO’s capital strength continues to support aggressive shareholder returns. The CET1 ratio of 13.5% provides ample capacity for dividends and buybacks, while leverage and liquidity remain conservative. The new 30 million–share buyback authorization, a 50% increase over the previous plan, signals confidence in ongoing earnings growth.
At the same time, BMO’s dividend track record remains among the most consistent in the Canadian market, with a payout ratio of roughly 45%. The bank has now delivered 12 consecutive years of dividend growth, positioning itself as a dependable income play with an improving growth profile.
Management also emphasized that capital levels remain strong even under stressed scenarios, leaving room for both organic expansion and selective M&A opportunities, reinforcing BMO’s disciplined yet shareholder-focused approach to capital allocation.
The TIKR Takeaway
NatWest has delivered strong profit growth, stable margins, and better cost efficiency. The bank benefits from a large customer base, disciplined deposit pricing, and consistent digital adoption. The capital profile remains strong, providing the bank with flexibility in capital returns. These strengths make the business more stable than in past cycles.
The outlook carries risk as competition in deposits remains high, even though mortgage activity remains slow. The normalising rate environment will put pressure on margins. The company must sustain cost discipline to keep earnings steady. If the bank continues to balance margin, cost control, and capital strength, it can maintain reliable profit growth.
Should You Buy, Sell, or Hold NatWest Group’s Stock in 2025?
NatWest offers stable earnings, strong capital strength, and consistent returns. The shares work for investors who want a well-capitalised UK retail bank with steady profitability. The main watch points are deposit competition, mortgage trends, and long-term cost control. The stock fits a balanced portfolio that seeks income and moderate growth.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
