NatWest Group Plc: H1 2025 Interim Results Summary
Business Context and Reporting Period
This Form 6-K reports the unaudited interim results for NatWest Group Plc for the six months ended 30 June 2025. The period marks the bank's return to full private ownership following the UK Government's sale of its remaining shareholding in May 2025. The group completed the acquisition of balances from Sainsbury's Bank on 1 May 2025, adding 1.1 million new customers. The reportable segment "Private Banking" was renamed "Private Banking & Wealth Management" effective Q2 2025.
Key Financial Metrics
| Metric | H1 2025 | H1 2024 | Variance |
|---|---|---|---|
| Total Income | £7,985m | £7,134m | +11.9% |
| Operating Profit | £3,585m | £3,029m | +18.4% |
| Profit for the Period | £2,675m | £2,239m | +19.5% |
| Profit Attributable to Ordinary Shareholders | £2,488m | £2,099m | +18.5% |
| Earnings Per Share (Basic) | 30.9p | 24.2p | +27.7% |
| Return on Tangible Equity (RoTE) | 18.1% | 16.4% | +1.7pp |
| Cost:Income Ratio (excl. litigation/conduct) | 48.8% | 55.5% | -6.7pp |
| Loan Impairment Rate | 19bps | 3bps | +16bps |
| Common Equity Tier 1 (CET1) Ratio | 13.6% | 13.6% | Flat |
| Risk-Weighted Assets (RWAs) | £190.1bn | £183.2bn | +3.8% |
| Liquidity Coverage Ratio (LCR) | 147% | 150% | -3pp |
Material Changes vs. Prior Period
- Income Growth: Total income rose 11.9% year-on-year, driven by balance sheet growth, deposit margin expansion, and higher structural hedge income. Net interest income increased 13.2% to £6.12bn.
- Cost Efficiency: The cost:income ratio (excluding litigation and conduct) improved significantly by 6.7 percentage points to 48.8%, reflecting ongoing digitization, headcount reductions (approx. 1,400 FTE vs H1 2024), and strategic exits from Poland and the Republic of Ireland.
- Impairment Charges: Impairment losses increased to £382m (vs £48m in H1 2024). This was primarily due to the initial ECL cost from the Sainsbury's Bank acquisition (£81m) and higher Stage 3 charges in the Commercial & Institutional portfolio, partially offset by post-model adjustment releases.
- Balance Sheet: Net loans to customers grew by £6.8bn to £407.1bn. Customer deposits increased by £3.3bn to £436.8bn. The acquisition of Sainsbury's Bank contributed £2.2bn to loans and £2.4bn to deposits.
- Capital: The CET1 ratio remained stable at 13.6% despite a £6.9bn increase in RWAs, supported by strong capital generation of 101 basis points pre-distributions.
Guidance, Outlook, and Management Commentary
- Guidance Upgrade: Management upgraded its 2025 guidance, now expecting:
- RoTE of greater than 16.5%.
- Income excluding notable items greater than £16.0bn.
- Group operating costs (excl. litigation/conduct) around £8.1bn.
- Loan impairment rate below 20 basis points.
- RWAs in the range of £190-195bn.
- Shareholder Returns: An interim dividend of 9.5p per share (58% higher than prior year) was declared. A share buyback programme of £750 million is scheduled to commence in the second half of 2025.
- Strategic Focus: The group is focusing on "bank-wide simplification," enhancing tech and AI capabilities, and disciplined growth. A new target was announced to provide £200bn in climate and transition finance between July 2025 and end of 2030.
- Risks: Key risks include economic and political uncertainty (inflation, interest rates, geopolitical developments), execution risk regarding strategy and acquisitions, and ongoing litigation and regulatory matters (including LIBOR, FX, and spoofing cases).
Key Facts for Investor Verification
- Sainsbury's Bank Integration: Verify the ongoing integration costs and the specific impact of the acquired portfolio on future impairment rates and cost:income ratios beyond the initial acquisition charge.
- Impairment Trends: Monitor the loan impairment rate, which rose to 19bps, to ensure it remains below the 20bps guidance target amidst economic uncertainty.
- Capital Generation: Confirm the ability to maintain the CET1 ratio within the 13-14% target range while funding the £750m buyback and increased dividend.
- Litigation Provisions: Review the status of major litigation (LIBOR, FX, Swaps) and whether existing provisions remain adequate as settlements are finalized (e.g., FDIC LIBOR settlement paid in June 2025).
- Cost Savings: Track the realization of efficiency gains from digitization and the withdrawal from the Republic of Ireland to sustain the improved cost:income ratio.