NatWest Group 2026 Q2 Earnings Call

Good morning, everyone, and thank you for joining us. Our results today show how we've created a bank with increasing momentum through our focus on sustainable growth and returns. By delivering growth across all three businesses, improving operating leverage, and managing our capital and risk, we've created the most efficient large U.K. bank with the lowest cost of risk, delivering the strongest capital generation and highest returns. Our ambition for the future is founded on the strengths we've created and the opportunities we see ahead. The U.K.'s next phase of growth will be shaped by a handful of defining trends, we have built leadership positions in areas that will drive the next decade, such as wealth, AI, and infrastructure. Our performance makes clear we have the capability and capacity to grow at scale.

We're seizing the opportunity to maximize our position as a trusted partner for customers and to help stimulate growth across the U.K. In February, we set out how we plan to deliver our 2028 targets by pursuing disciplined growth, leveraging simplification, and actively managing our capital and risk. Our aim is to grow customer assets and liabilities at an annual rate of more than 4%, to reduce our cost-income ratio to below 45%, and to generate over 200 basis points of capital before distributions, with a return on tangible equity of more than 18%. Our strategy is delivering excellent results as we make good progress against these ambitions. Let me give you the financial headlines. We have deliberately built a scaled business that benefits from structural U.K. growth drivers to deliver strong returns on a sustainable basis. Our return on tangible equity was industry leading at 19.7%.

Our acquisition of Evelyn Partners has now completed and boosts our exposure to the fast-growing U.K. wealth market. Customer assets and liabilities grew 13.4%, including Evelyn Partners. Assets under management and administration increased more than 150% to GBP 131 billion. Excluding Evelyn Partners, CAL grew 5.2%, well above our target of more than 4%. We continue to drive operating leverage. Income growth of 8.9% is significantly ahead of cost growth of 4.5%. Our cost-income ratio reduced 2.8 percentage points to 46%, getting close to our 2028 target. Strong operating leverage, together with a low cost of risk, has driven 23% growth in earnings per share to GBP 0.38, with a 26% increase in our interim dividend to GBP 0.12 and a 13% uplift in TNAV per share, excluding Evelyn Partners.

We also generated high levels of capital at 137 basis points, and our balance sheet remains strong with a CET1 ratio of 13.2% after the acquisition of Evelyn Partners. Given the strength of our performance and our confidence in the outlook, we are upgrading our 2026 returns guidance to more than 19%. Our strong capital generation has allowed us to invest in growth and acquire Evelyn Partners while still having surplus capital. We are bringing forward the point at which we consider buybacks by six months to the year-end results. You can see from the distribution of CAL on this slide that with the addition of Evelyn Partners, we now have three scale businesses. Growth is broad based and diversified across them. Each one shows increasing operating leverage, and each one delivers industry leading returns of 20% or more.

All three businesses are well-positioned to benefit from attractive structural growth opportunities, and we are allocating capital dynamically to optimize risk-adjusted returns. Our retail bank has a strong track record of gaining share at attractive returns with a clear opportunity for further growth in key target areas. We now have the U.K.'s leading private banking and wealth management business in a high growth market where regulatory change is accelerating customer demand. Commercial and institutional is capturing structural growth opportunities by building on its leading position in mid-market banking and in sectors such as infrastructure and social housing. Let me update you on our strategic progress. Our retail bank serves 19 million customers or one in three U.K. families, with an opportunity to continue growing in savings, investments, and lending to align with our share of current accounts of over 16%.

One way we are capturing this is by targeting growth in key customer segments such as youth, families, and affluent. By strengthening our leading position in the youth market, we are creating the next generation of primary banking relationships and boosting our long-term funding base. We are building here on the success of our NatWest Rooster Money app. Its customer base has grown 18 times since 2021, and it has a leading net promoter score of 72. We increased the number of Rooster customers by 15% over the last year. We opened around 50% more junior ISAs, and we enhanced our offer for teenagers with a new card and new features on the app. We also grew our share in savings and investments, mainly with affluent customers, as we opened 20% more ISA accounts and attracted 32% more customers to invest with us.

There was also strong momentum in our private banking and wealth management business. Prior to the acquisition of Evelyn Partners, it attracted GBP 2 billion of net inflows to assets under management. This is a record performance representing a 33% uplift on last year and more than 9% of opening balances. These inflows were supported by over 45,000 customers across the group investing with us for the first time, a 60% uplift on last year. As well as 11% growth in the number of high net worth clients we serve with more than GBP 3 million of assets and liabilities. This progress will be accelerated by the acquisition of Evelyn Partners, which I'll talk about on the next slide. Commercial and Institutional is the U.K.'s biggest bank for business.

It serves 1.5 million customers across the U.K., ranging from startups, where we have a leading 20% share, through the mid-market, to large corporates and financial institutions. We gain a clear competitive advantage here from our longstanding presence across the nations and regions, as well as our highly experienced network of more than 1,000 relationship managers. They are rooted in their local communities, offering businesses both local knowledge and deep sector expertise. This enables us to play an important role in regional economies, giving us a distinctive platform to support investment and capture growth. We are capitalizing on our market-leading positions in areas such as infrastructure, social housing, and transition finance to take advantage of structural growth, and building on our leading position in debt capital markets to support corporates, not just with lending, but with broader funding needs.

We delivered GBP 23 billion of climate and transition finance in the first half, making good progress towards our GBP 200 billion 2030 target. All three businesses continue to leverage simplification to improve customer and colleague experience and drive efficiency. The use of AI is changing how our customers live and work, as well as their expectations of us. It is also reshaping financial services. While the pace is faster and the tools have evolved, the fundamentals remain the same. Success in our sector has long been built on relationships and on trust, the real value of AI comes when it builds stronger customer relationships, strengthens trust, and delivers growth through better insight, experience, and outcomes. That's why we continue to invest in leading capabilities. Last year, we created a new AI research office to enable faster innovation and to accelerate our responsible deployment of AI.

The benefits for both customers and colleagues are clear. A smoother customer experience, quicker, more informed decisions, and more time for colleagues to focus on what matters most, building trusted relationships and delivering better customer outcomes. For example, we are using AI to deliver new customer propositions faster, in hours rather than weeks, to help customers understand their spending habits better, to help them resolve cases of fraud through natural language conversations with our digital assistant, Cora, and to provide relationship managers with greater client insight and more capacity for productive engagement. The operational momentum in each of our businesses is demonstrated by operating profit growth of more than 15%. I'd like to turn now to the acquisition of Evelyn Partners. Evelyn Partners allows us to deliver an exciting step change in our private banking and wealth management business, generating sustainable growth and returns.

We now have a highly differentiated, scalable, end-to-end wealth proposition comprising advice, planning, and investments with the largest employed network of financial advisors across the U.K. and a highly regarded direct-to-consumer investment platform. The combination of planning and investment capabilities with banking, savings, and wealth management services gives us a unique position in the market and a distinctive offering for our 20 million customers. One month in, Evelyn Partners is performing in line with expectations, the integration is going well. We were able to hit the ground running, having planned since February, we're executing at pace with a focus on the most valuable revenue opportunities. We have a single leadership team under Emma Crystal. We have created an integrated financial planning team to take advantage of opportunities like targeted support, we are already seeing business referrals in both directions.

We are excited about the opportunity ahead and the value that Evelyn Partners brings both for the group and for shareholders. We look forward to updating you further at an in-depth spotlight in the fourth quarter. Our strategy is focused on driving sustainable growth and returns, which in turn generates higher levels of capital, giving us both resilience and flexibility. Let me remind you of our approach to capital allocation. We have a robust balance sheet and aim to operate with a CET1 ratio of around 13%, giving us appropriate headroom above minimum requirements. Our strong capital generation enables us to invest in our business, to grow and to deepen customer relationships. We are both disciplined and dynamic in our deployment of capital, and our diversification across three businesses gives us optionality through the cycle to optimize risk-adjusted returns.

We also apply a high bar as we consider acquisitions that accelerate our progress through additional scale or capabilities. Our strategy is delivering attractive and growing shareholder returns, and we remain committed to a dividend payout ratio of around 50% and to returning surplus capital to shareholders via share buybacks. This translates into compounding growth in earnings, dividends, and TNAV per share. Given the strength of our performance and the inclusion of Evelyn Partners, we are upgrading our 2026 guidance. We now expect a return on tangible equity of more than 19%, and we are bringing forward the date when we consider share buybacks to our full year 2026 results. The momentum we are seeing in customer growth, efficiency, and returns gives us great confidence for the future.