NatWest Earnings: Good Quarter Despite Higher Provisions; Shares Attractive

Key Morningstar Metrics for NatWest Group

• Fair Value Estimate
  : GBX 710
• Morningstar Rating
  : ★★★★
• Morningstar Economic Moat Rating
  : Narrow
• Morningstar Uncertainty Rating
  : Medium

What We Thought of NatWest Group’s Earnings

NatWest NWG reported operating profits of £2 billion, 12% ahead of the same quarter a year ago, despite taking higher provisions. Total income guidance is now expected to reach the top of the range for 2026.

Why it matters: An update to the modeled economic scenarios over the next few years, primarily more severe downside scenarios, has resulted in an additional £140 million provision charge. We have seen a similarly cautious stand at Lloyds and other European banks this earnings season.

• Net interest income declined 1% sequentially, although primarily driven by fewer days in the quarter. Volume growth across loans and deposits was good, while the net interest margin increased 2 basis points. Other income was virtually flat, quarter over quarter.
• Operating efficiency of 47% was an improvement both year over year and in the last quarter of 2025. Investments in the simplification and digitization of the business are bearing fruit, which we believe will allow NatWest to achieve higher structural profitability than over the past decade.

The bottom line: We maintain our GBX 710 per share fair value estimate and narrow Economic Moat Rating. Shares are attractive at these levels.

• We expect a series of good quarters from NatWest in 2026, although risk to the downside exists, especially into next year. If heightened macroeconomic uncertainties remain persistent and start to force larger loan loss write-offs, near-to-medium term profitability and capital generation will be impaired.
• On balance, we believe NatWest provides the best risk-reward trade-off among the UK banks.