NatWest Group (NWG) Q3 2026 earnings review
NatWest rebuilds its capital buffer, but credit card defaults double
NatWest, the British banking group, grew its lending and wealth fee income while higher bad-debt charges weighed on quarterly profit. Revenue excluding one-offs rose 10% from a year ago as commercial loans expanded and the newly acquired Evelyn Partners wealth business joined the accounts. Finance chief Katie Murray lifted her fourth-quarter UK interest-rate assumption to 4%, but pre-tax profit dipped 3% from last quarter because credit-card defaults nearly doubled the loan-impairment charge.
| Revenue excluding one-offs | £4,587M +10.1% from a year ago |
|---|---|
| Net interest margin | 2.50% +0.13 percentage points from a year ago |
| Core capital ratio (CET1) | 13.5% 13.2% last quarter |
| Full-year outlook | Unchanged 1 Jan 2027 risk-weighted assets set at ~£210B |
⚖️ Verdict: 🟢 Bullish
The story got better because the capital squeeze that followed the Evelyn Partners takeover is easing faster than planned. The core capital ratio rebounded to 13.5%, and a new £210 billion cap on January 2027 risk-weighted assets alongside a 0.4 percentage point cut in regulatory capital requirements gives the bank more room for its February 2027 share buyback. One caution: credit-card accounts opened since 2022 are defaulting more often, and rapid loan growth has pushed up short-term market borrowing.
The question now is whether the unchanged £17.9 billion full-year revenue plan is simply cautious or a sign that mortgage competition and weak trading are eating up the benefit of 4% interest rates. By our math, the plan leaves fourth-quarter revenue growing just 1% from Q3. Fourth-quarter revenue and the February 2027 share buyback announcement will settle it.
🐂 Bull Case
Higher Rate View Lifts the Deposit Margin
NatWest, the British banking group, earns most of its revenue from the gap between what it charges borrowers and what it pays savers, measured by its net interest margin (NIM). Finance chief Katie Murray lifted the bank's interest-rate assumption instead of preparing for cuts. "We now assume the Bank of England base rate will rise by 25 basis points to 4% in the fourth quarter of 2026," Murray wrote.
Net interest income grew 8.9% from a year ago to £3.56 billion, and NIM rose 13 basis points to 2.50%. That margin expanded 1 basis point from last quarter even after a £35 million charge reduced it by 2 basis points "following a routine review of customer repayment behaviour across Retail Banking and Commercial & Institutional".
This matters because higher UK interest rates let the lender reinvest its structural hedge — fixed-rate swaps that smooth out interest income — at higher yields while widening the profit on customer deposits. Those gains more than offset narrower margins on home mortgages.
What to watch: the full-year structural hedge income disclosure in February 2027. A rise above £1.5 billion for 2026 would confirm that higher UK rates are locking in multi-year interest gains.
Capital Relief Lowers the Basel 3.1 Hurdle
Buying wealth manager Evelyn Partners last quarter cut the bank's Common Equity Tier 1 (CET1) ratio — its core buffer of loss-absorbing capital — to 13.2%, near its 13% target, and delayed the next share buyback until February 2027. Investors worried that new Basel 3.1 banking rules on 1 January 2027, which previously carried an estimated £10 billion jump in risk-weighted assets (RWAs, the risk-adjusted loans and assets that determine required capital), would squeeze that buffer further.
Three disclosures this quarter eased that capital squeeze:
- CET1 ratio: rose 30 basis points from last quarter to 13.5%, helped by £1.8 billion of RWA reductions
- New 1 January 2027 RWA outlook: around £210 billion including Basel 3.1, up £9.5 billion from £200.5 billion in Q3
- Pillar 2A CET1 requirement (a bank-specific regulatory capital add-on): drops from 1.6% to 1.2% on 1 January 2027
The lower regulatory requirement frees up 40 basis points of capital on the exact day the Basel 3.1 rules take effect, so the bank has more room to fund its February 2027 share buyback.
What to watch: the size of the share buyback announced with full-year results in February 2027. A programme matching prior £750 million rounds would prove the Evelyn deal did not impair shareholder returns.
Wealth Acquisition Adds Fees and Positive Flows
NatWest bought Evelyn Partners on 30 June 2026 to build its Private Banking & Wealth Management division and earn more fee income outside traditional lending. The bank said "the integration of Evelyn Partners is progressing well, with both businesses growing", though critics have questioned whether key advisers and clients might leave after the takeover.
In the first full quarter of ownership, wealth division revenue rose 57.4% from a year ago to £447 million, and fee income from assets under management and administration (AUMA, client investments the bank manages or holds) more than doubled from last quarter to £225 million. Clients added £1.0 billion of net new managed money, a 3.4% annualised growth rate, lifting total AUMA to £132.4 billion. However, the release did not separate Evelyn's standalone revenue from £128 million of added operating costs and £28 million of intangible amortisation.
What to watch: standalone Evelyn net inflows and cost savings at the full-year results in February 2027. Sustained inflows above 3% a year would show clients are staying through the integration.
Corporate Lending and Cost Cuts Drive Efficiency
Commercial & Institutional — the division serving British companies, housing associations and financial firms — is the main lending engine of the group. Meanwhile, chief executive Paul Thwaite is simplifying technology to cut the cost:income ratio (operating expenses excluding legal conduct charges as a share of revenue) below 45% by 2028.
Commercial net loans grew by £6.7 billion in the quarter, or 4.1%, to £170.4 billion, pushing total customer loans excluding central items up £8.1 billion to £414.3 billion. Across the group, other operating expenses — day-to-day running costs excluding legal conduct charges — fell 0.7 percentage points as a share of revenue from a year ago to 45.1%. Excluding £128 million of Evelyn costs, those running expenses fell 1.1% from a year ago by our math, as 1,400 staff reductions this year and £420 million of gross savings outweighed pay rises.
What to watch: Commercial & Institutional loan growth in Q4. Another gain near £5 billion without higher corporate defaults would keep revenue growing ahead of costs.
🐻 Bear Case
Credit Card Defaults and Wholesale Funding Rise
"NatWest Group has delivered another strong performance in the third quarter of 2026," chief executive Paul Thwaite said, and the bank described its loan book as resilient. Yet pre-tax profit fell 2.6% from last quarter to £2.23 billion and net profit attributable to ordinary shareholders fell 4.1% from a year ago to £1.53 billion because loan impairment losses nearly doubled.
- Loan impairment losses: £277 million (24 basis points of loans), up 97.9% from last quarter and up 2.4 percentage points of revenue from a year ago
- Retail Banking impairment rate: 34 basis points of loans, double last quarter's 17 basis points
- Short-term wholesale funding (market borrowing due within one year): £41 billion, up 46.4% since December 2025
- Average Liquidity Coverage Ratio (LCR, cash buffer for a 30-day stress): 137%, down from 147% in December 2025
Murray said the higher credit charge "primarily reflected the non-repeat of releases in Q2 2026 and higher Stage 3 charges" (loans in default). In Retail Banking, defaults rose "reflecting the maturation of credit card cohorts originated through strategic new business growth since 2022", while Commercial & Institutional added £40 million to its economic-uncertainty reserve this year for Middle East conflict risks. At the same time, lending grew faster than deposits, so the bank relied more on short-term market borrowing.
What to watch: the Q4 loan impairment rate against the full-year ceiling of 25 basis points. Another reading at or above 24 basis points would show that 2022 credit card cohorts are creating a higher baseline of bad debts.
Unchanged Plan Pointed to Flat Fourth-Quarter Revenue
After raising its full-year revenue forecast in both the first and second quarters, NatWest left its 2026 income and cost targets unchanged in Q3. The bank kept its target for total income excluding notable items (one-off derivative and foreign-exchange swings) at around £17.9 billion and other operating expenses at around £8.5 billion, even though Murray raised her fourth-quarter UK interest-rate assumption to 4%.
With £13.26 billion of revenue excluding one-offs already booked in the first nine months, the unchanged forecast leaves £4.64 billion for Q4 by our math — up only 1.2% from Q3. Meanwhile, £6.17 billion of nine-month running costs leaves £2.33 billion of fourth-quarter expenses by our math, up 11.6% from Q3 as annual bank levies and restructuring charges arrive.
What to watch: Q4 total income excluding notable items in February 2027. A figure near £4.64 billion would mean mortgage competition and deposit shifts are eating up the benefit of a 4% base rate.
Trading Income Drop and Mortgage Margin Pressure
Outside interest on loans and wealth fees, NatWest relies on financial-markets trading in its Commercial & Institutional unit and on UK home mortgages in Retail Banking. Both areas faced pressure this quarter.
Group trading income fell 64.9% from a year ago and 39.9% from last quarter to £140 million, dragging down non-interest income growth to 1.6% from a year ago despite the addition of Evelyn Partners. In Retail Banking, revenue fell 1.9% from last quarter to £1.72 billion and the division's net interest margin slipped 4 basis points to 2.65%, hurt by lower mortgage margins and a £25 million adjustment for how quickly customers repay mortgages and credit cards.
What to watch: Retail Banking net interest margin in Q4. A further drop once the £25 million repayment adjustment is past would show that mortgage pricing competition is worsening.
💲 Other KPIs
Customer deposits excluding central treasury repo activity rose by £5.8 billion, or 1.3%, from last quarter and 4.3% from a year ago. Retail Banking added £3.1 billion in savings and Commercial & Institutional added £3.0 billion. Fixed-term accounts rose to 19% of total deposits, up from 18% last quarter and 17% in December 2025.
Return on tangible equity — annualised profit as a percentage of shareholder equity excluding goodwill and intangibles — rose 0.6 percentage points from last quarter, though it was 0.7 points lower than a year ago when a one-off derivative gain boosted results. Nine-month return reached 20.2%, ahead of the bank's full-year target of more than 19%.
Tangible net asset value per share held steady from last quarter, as third-quarter profit was offset by the 12 pence interim dividend payment and a £584 million nine-month reduction in the cash-flow hedging reserve from higher swap rates. It remains 25 pence below December 2025 after deducting £2.98 billion of Evelyn Partners goodwill and intangibles.
🔮 Guidance
New total figure. Management wrote: "Based on our latest expectations for interest rates and economic conditions, we reaffirm the outlook provided in our H1 2026 results, with the enhancement that we now expect RWAs to be around £210 billion on 1 January 2027 including the impact of Basel 3.1." Starting from £200.5 billion in Q3, that leaves £9.5 billion for both fourth-quarter loan growth and the previously estimated £10 billion regulatory jump.
Unchanged. The full-year plan calls for about 9.1% revenue growth excluding one-off items, including roughly £275 million from Evelyn Partners. By our math, that leaves £4.64 billion for Q4, or 8.6% growth from a year ago and 1.2% from Q3. It is the first quarter this year that the bank did not raise the target after lifting it by £200 million in Q1 and £300 million in Q2.
Unchanged. The plan keeps running costs excluding legal conduct charges near £8.5 billion, up 5.0% from 2025 including roughly £300 million from Evelyn Partners. By our math, that leaves £2.33 billion of costs for Q4, up 5.5% from a year ago and pushing the fourth-quarter cost:income ratio to 50.3% when annual UK bank levies are booked.
Unchanged. The lender expects a full-year return on tangible equity above 19%, having already raised the target from 17% at the half-year mark. With the nine-month return sitting at 20.2% and Q3 at 21.6%, the full-year target looks easily achievable even with seasonally higher fourth-quarter costs.
Unchanged. The bank still plans for full-year bad-debt charges to stay below 25 basis points of gross customer loans. After a 24 basis point charge in Q3 lifted the nine-month rate to 21 basis points, fourth-quarter defaults can rise further and still meet the full-year cap.
Unchanged. The plan calls for more than 240 basis points of capital generation before shareholder payouts and the initial Evelyn Partners deduction. Having generated 208 basis points in the first nine months (71 basis points in Q3), the bank needs only 32 basis points in Q4 by our math to pass its floor.
❓ Key Questions
What is Evelyn Partners' standalone revenue and client retention?
The release disclosed £128 million of Evelyn operating expenses and £28 million of intangible amortisation in Q3, but did not break out Evelyn's standalone revenue or net flows within the wealth division. Investors need those figures to judge whether advisers and clients are staying.
Why did the revenue outlook not rise with 4% rates?
Finance chief Katie Murray raised her fourth-quarter Bank of England base-rate assumption from 3.75% to 4%, yet kept the full-year revenue target at around £17.9 billion. Management did not explain whether lower trading revenue or mortgage pressure offset the rate gain.
How high will credit card losses peak as cohorts mature?
Retail Banking loan impairments doubled to 34 basis points as credit card accounts opened since 2022 matured into default, and the bank shifted more economic-uncertainty reserves into cards. Management did not say when defaults from those 2022–2024 cohorts will peak.
How much capital will go to the February 2027 buyback?
With the 1 January 2027 risk-weighted asset target set at £210 billion and the Pillar 2A CET1 requirement dropping by 40 basis points on the same day, how much surplus capital above the 13% target will be available for the February 2027 buyback?