20-F: NatWest Group Reports Strong 2025 Performance, Boosts Dividends

NatWest Group plc announced robust financial results for 2025, with significant profit growth, increased shareholder distributions, and positive momentum across its core banking segments.

Summary

• NatWest Group reported a profit attributable to ordinary shareholders of £5,479 million for 2025, a 21.2% increase from £4,519 million in 2024.
• Total income rose by 13.2% to £16,641 million, with total income excluding notable items increasing by 12.0% to £16,400 million.
• Net interest margin (NIM) improved by 21 basis points to 2.34% in 2025.
• The company proposed a final dividend of 23.0 pence per share, bringing the total dividend for 2025 to 32.5 pence per share, a 51% increase from 2024.
• A new share buyback program of £750 million is intended to commence in the first half of 2026, contributing to total capital distributions of £4.1 billion in 2025.
• Return on Tangible Equity (RoTE) increased to 19.2% in 2025 from 17.5% in 2024.
• Loans to customers grew by 4.6% to £418.9 billion, and customer deposits increased by 2.2% to £443.0 billion.
• The Common Equity Tier 1 (CET1) ratio strengthened by 40 basis points to 14.0%, within the target range of 13-14%.
• Operating expenses, excluding litigation and conduct costs, were £8,095 million, aligning with cost discipline efforts.
• The loan impairment rate increased to 16 basis points in 2025 from 9 basis points in 2024, reflecting charges from the Sainsbury's Bank acquisition and higher Stage 3 charges.
• NatWest Group exceeded its previous target of £100 billion in climate and sustainable funding and financing in Q1 2025, and set a new target of £200 billion in climate and transition finance between July 1, 2025, and the end of 2030.

Sentiment

Score: 9

Explanation: StockSavvy.ai views this as a highly positive filing, reflecting strong financial performance across key metrics, significant shareholder returns, and clear strategic execution. The positive outlook and commitment to digital and sustainable finance further bolster confidence.

Positives

• Profit attributable to ordinary shareholders increased by 21.2% to £5,479 million.
• Total income grew by 13.2% to £16,641 million, exceeding strengthened guidance.
• Net interest margin (NIM) expanded by 21 basis points to 2.34%.
• Return on Tangible Equity (RoTE) improved to 19.2%, demonstrating efficient capital utilization.
• Total dividend per ordinary share for 2025 increased by 51% to 32.5 pence.
• A new £750 million share buyback program is planned for H1 2026, signaling continued shareholder returns.
• CET1 ratio increased to 14.0%, maintaining a strong capital position within the target range.
• Cost:income ratio (excl. litigation and conduct) improved to 48.6% from 53.4%, reflecting strong cost discipline.
• Customer lending grew by £18.6 billion (4.6%) and customer deposits increased by £9.5 billion (2.2%).
• Successful integration of approximately one million Sainsbury's Bank customer accounts and the £2.3 billion Metro Bank mortgage portfolio.
• Achieved 81.8% of Retail Banking customers banking entirely digitally and 84.5% of Commercial & Institutional customers banking digital first.
• Exceeded the £100 billion climate and sustainable funding and financing target and set a new, higher target of £200 billion for climate and transition finance.
• Operational emissions (Scope 1 & 2) reduced by 66% and Scope 3 operational emissions by 47% against a 2019 baseline.

Negatives

• Loan impairment rate increased to 16 basis points in 2025 from 9 basis points in 2024, driven by acquisition charges and higher Stage 3 charges.
• Total capital ratio decreased by 40 basis points to 19.3% in 2025.
• UK leverage ratio decreased by 0.2% to 4.8% in 2025.
• MREL ratio decreased by 110 basis points to 31.9% due to RWA increase and AT1/Tier 2 capital movements.
• Average Liquidity Coverage Ratio (LCR) decreased by 4 percentage points to 147% in 2025.
• Average Net Stable Funding Ratio (NSFR) decreased by 2 percentage points to 135% in 2025.
• Total value of operational risk events increased to £76 million in 2025 from £18 million in 2024, primarily due to the release of unutilized provisions in 2024.
• Received 255,000 reportable customer complaints in 2025, up from 239,000 in 2024, partly due to Sainsbury's Bank onboarding and increased fraud/scams.

Risks

• Continued economic and political risks and uncertainties in the UK and global markets, including inflation, interest rates, supply chain disruption, protectionist policies, and geopolitical developments.
• Changes in interest rates will continue to affect business and results, with potential adverse impacts on net interest margin and asset/liability valuations.
• Fluctuations in currency exchange rates may adversely affect results and financial condition, particularly sterling-US dollar and sterling-euro rates.
• Execution and operational risks in implementing the company's strategy, including potential failure to achieve stated aims, targets, or anticipated benefits from acquisitions/divestments.
• Highly competitive markets with evolving pressures and technology disruption from incumbent banks, challenger banks, fintechs, and large technology conglomerates.
• Exposure to counterparty and borrower risk, including credit losses, which may be exacerbated by high household indebtedness, property price volatility, or financial sector instability.
• Inability to meet prudential regulatory requirements for liquidity and funding, or to adequately access funding sources, potentially triggering recovery options or asset liquidation.
• Failure to meet prudential regulatory requirements for regulatory capital and MREL, or to manage capital effectively, which could lead to increased supervision, sanctions, or restrictions on capital distributions.
• Reductions in credit ratings could adversely affect funding availability, liquidity, and increase funding costs.
• Losses or higher capital requirements due to limitations or failure of various models, including those incorporating artificial intelligence.
• Sensitivity of financial statements to underlying accounting policies, judgments, estimates, and assumptions, particularly those related to climate and sustainability.
• Changes in accounting standards or their interpretation may materially impact financial results.
• Effectiveness of credit protection (e.g., CDS, SRT, CRI) depends on underlying asset values and financial condition of insurers/counterparties.
• Failure to meet regulatory stress test requirements or inadequate resolution preparations could lead to additional capital requirements or operational restrictions.
• Application of UK statutory stabilisation or resolution powers could result in cancellation, transfer, dilution, write-down, or conversion of ordinary shares or other securities.
• Operational risks, including reliance on third-party suppliers, outsourcing, human error, and financial crime (fraud, money laundering).
• Sophisticated and frequent cyberattacks, and increasing complexity of cybersecurity and data protection regulations.
• Dependence on the accuracy and effective use of data, with potential for competitive disadvantage or regulatory non-compliance from data weaknesses.
• High dependence on complex IT systems, with any IT failure potentially causing significant disruption, reputational damage, and regulatory sanctions.
• Reliance on attracting, retaining, and developing diverse senior management and skilled personnel in a competitive market, and maintaining good employee relations.
• Exposure to various litigation matters, regulatory and governmental actions, and investigations, with inherently difficult-to-predict outcomes.
• Changes in tax legislation or failure to generate future taxable profits may impact the recoverability of deferred tax assets.
• Climate and sustainability-related risks (physical, transition, liability) impacting operations, asset values, creditworthiness, and potentially leading to reputational damage or litigation.
• Limitations in accessing accurate, reliable, and comparable climate and sustainability-related data, contributing to uncertainties in assessment and reporting.

Future Outlook

NatWest Group anticipates continued strong performance, expecting total income (excluding notable items) in the range of £17.2-17.6 billion for 2026, with operating expenses (excluding litigation and conduct costs) around £8.2 billion, and a loan impairment rate below 25 basis points. Return on Tangible Equity is projected to be greater than 17%, with capital generation pre-distributions around 200 basis points. By 2028, the company targets customer assets and liabilities to grow at a compound annual rate of greater than 4%, a cost:income ratio (excluding litigation and conduct costs) below 45%, and RoTE greater than 18%. The CET1 ratio target remains around 13.0%, with ordinary dividends expected to be around 50% of attributable profit, complemented by appropriate share buybacks. Basel 3.1 reforms are expected to increase RWAs by approximately £10 billion on January 1, 2027.

Management Comments

• Rick Haythornthwaite, Chair: "2025 was a year of strong performance and progress for our bank. Indeed, profits and returns were both up from 2024, so too our lending, deposits and the number of customers we serve. We consistently outperformed expectations – delivering for our customers, shareholders, and the wider UK."
• Rick Haythornthwaite, Chair: "Fundamentally, I’m optimistic about the future for our bank and for the UK."
• Rick Haythornthwaite, Chair: "Our financial performance demonstrates that the strategy set by NatWest Group’s CEO Paul Thwaite and his team is delivering."
• Paul Thwaite, Group Chief Executive Officer: "NatWest Group delivered another strong year in 2025, rooted in our support for people, families and businesses in every nation and region of the UK."
• Paul Thwaite, Group Chief Executive Officer: "We start 2026 from a position of strength. That strength gives us the confidence to raise our ambition and accelerate our progress – so we can go further to win together with our customers, colleagues, shareholders and the communities we are proud to serve across the UK."
• Katie Murray, Group Chief Financial Officer: "We delivered a strong performance in 2025. Total income was 16.6 billion with total income excluding notable items of 16.4 billion exceeding our strengthened Q3 2025 guidance."
• Katie Murray, Group Chief Financial Officer: "We remained focused on cost discipline, achieving our cost target and with further progress made on simplification."

Industry Context

StockSavvy.ai notes that NatWest Group's strong 2025 performance, particularly in net interest margin expansion and cost discipline, positions it favorably within a competitive UK banking landscape. The focus on digital transformation, AI integration, and sustainable finance aligns with broader industry trends of technological adoption and ESG commitments. The successful integration of acquired portfolios (Sainsbury's Bank, Metro Bank) demonstrates effective M&A capabilities, a key differentiator in a consolidating market. While macroeconomic uncertainties persist, NatWest's emphasis on diversified customer growth and active balance sheet management reflects a prudent strategy to navigate potential headwinds, contrasting with some competitors who may face greater exposure to specific market volatilities.

Comparison to Industry Standards

• NatWest Group's RoTE of 19.2% in 2025 is a strong indicator of profitability, comparing favorably to many global banking benchmarks, which often target mid-to-high teens.
• The cost:income ratio (excl. litigation and conduct) of 48.6% demonstrates competitive efficiency, as many major UK and European banks strive for ratios below 50%.
• The CET1 ratio of 14.0% is robust and provides significant headroom above regulatory minimums, aligning with or exceeding the capital strength of many international peers.
• The 51% increase in total dividend per ordinary share for 2025 significantly outpaces dividend growth seen across much of the banking sector, reflecting strong shareholder returns.
• The average Liquidity Coverage Ratio (LCR) of 147% and Net Stable Funding Ratio (NSFR) of 135% indicate strong liquidity and funding positions, comfortably above the 100% minimum regulatory requirements, comparable to well-capitalized global banks.
• The achievement of 81.8% of Retail Banking customers banking entirely digitally and 84.5% of Commercial & Institutional customers banking digital first highlights strong digital adoption, a key competitive metric in modern banking.
• The new target of £200 billion in climate and transition finance by 2030 positions NatWest Group as a significant player in sustainable finance, comparable to leading global banks setting ambitious ESG targets.

Management Changes

Corporate Governance

Legal Proceedings

• USD LIBOR litigation: SDNY granted summary judgment to defendants on September 25, 2025, dismissing claims, but the decision is being appealed to the US Court of Appeals.
• JPY LIBOR and Euroyen TIBOR class action: Dismissed by SDNY in September 2021, currently under appeal to the US Court of Appeals.
• Euribor case: US Court of Appeals reversed SDNY's dismissal on August 22, 2025, reinstating claims against NWM plc, which has returned to the SDNY for further proceedings.
• Pound Sterling LIBOR case: US Court of Appeals affirmed SDNY's dismissal on September 15, 2025.
• FX cartel class action (Federal Court of Australia): NWM Plc settled the claim in May 2025, with court approval in August 2025; the settlement amount is covered by an existing provision.
• FX class action (UK Competition Appeal Tribunal): UK Supreme Court reinstated the CAT's decision to refuse an opt-out collective proceedings order in December 2025.
• FX class actions (Tel Aviv District Court, Israel): NWM Plc executed an agreement to settle the claim in February 2024, subject to court approval; the settlement amount is covered by an existing provision.
• FX claims (Netherlands): Multiple summonses served against NatWest Group plc, NWM Plc, and NWM N.V., with proceedings stayed pending a judgment from the Court of Justice of the European Union on jurisdiction.
• Swaps antitrust litigation (SDNY): Ongoing, with expert discovery in cases alleging violations of US antitrust laws in the interest rate swaps market.
• Credit default swap antitrust litigation (New Mexico): US Court of Appeals affirmed a January 2024 decision barring claims based on conduct before June 30, 2014; the case has resumed with a motion to dismiss pending.
• Odd lot corporate bond trading antitrust litigation (SDNY): Dismissed on September 2, 2025, and the case is now closed as plaintiffs did not appeal.
• Spoofing litigation (Illinois federal court): A motion to dismiss claims arising from manipulative trading (spoofing) remains pending.
• Madoff litigation (New York bankruptcy court): Claims seeking to clawback over US$300 million are proceeding in the discovery phase following an August 2021 US Court of Appeals decision.
• Offshoring VAT assessments (HMRC): NatWest Group plc is progressing its appeal before the Tax Tribunal regarding protective tax assessments totaling £143 million, with £153 million recognized as an asset expected to be recovered.
• US Anti-Terrorism Act litigation: The US Court of Appeals affirmed the dismissal of the first action in January 2023; other similar actions are pending.
• 1MDB litigation (Malaysian court): 1MDB withdrew its appeal and discontinued the claim in November 2025.
• Oracle Securities Litigation (New York state court): A class action complaint was filed on January 14, 2026, against Oracle Corporation and underwriters (including NWMSI) alleging materially misleading bond offering documents.

Related Party Transactions

• HM Treasury ceased to be a shareholder of NatWest Group plc on May 30, 2025, but was a related party until July 12, 2025, 12 months after its shareholding fell below 20%.
• Transactions with UK Government and UK Government-controlled bodies include payments of taxes (UK corporation tax, VAT, national insurance contributions, local authority rates, regulatory fees and levies) and banking transactions (loans and deposits).
• NatWest Group participates in schemes operated by the Bank of England, including reserve accounts and guarantees for certain subsidiaries' liabilities.
• Investments in associates and joint ventures, such as the Business Growth Fund, with ongoing business transactions on normal commercial terms.
• NatWest Group Pension Fund holds bank accounts with NatWest Group plc subsidiaries (balances amounted to £44.1 million at December 31, 2025).
• NatWest Group Pension Fund holds interest rate swaps, inflation swaps, credit derivatives, cross currency swaps, and forward exchange rate agreements with NatWest Group subsidiaries as counterparties, on commercial and arms-length terms.
• An agreement was established in February 2023 to create a new legal structure (bankruptcy remote reservoir trust) to hold assets for the Main section of the Group Pension Fund, with assets valued at £471 million transferred after the 2022 final dividend.

Stakeholder Impact

• Shareholders: Benefited from a 21.2% increase in profit attributable to ordinary shareholders, a 51% increase in total dividends (32.5p per share), and an announced £750 million share buyback program for H1 2026.
• Customers: Experienced growth in customer base (~1 million new customers), increased lending (£18.6 billion) and deposits (£9.5 billion), enhanced digital banking services (81.8% Retail, 84.5% C&I banking digitally), new mortgage products (Family-Backed, Shared Ownership), and improved fraud prevention.
• Employees (Colleagues): Received increased pay and bonus awards, benefited from the 'Winning Together' performance framework, access to AI tools for efficiency, and wellbeing initiatives. The company is committed to diversity targets (50% female, 19% ethnic minority, 5% Black in senior leadership by 2030).
• Communities: Supported through £11.0 million in direct community investment, £4.4 million raised through fundraising, 142,775 volunteering hours, Accelerator app for small businesses (12,000 members), and Financial Foundations workshops (31,000 participants).
• Regulators: Engaged in ongoing dialogue and compliance with evolving prudential regulations (Basel 3.1, DORA, MREL), and successfully passed regulatory stress tests.
• Suppliers: Benefited from an AI-powered sustainability risk tool, received the Gold Award from the Office of the Small Business Commissioner for fair payment, and experienced strengthening of sourcing and contracting controls.

Next Steps

• Commence a share buyback programme of £750 million in the first half of 2026.
• Pay a final dividend of 23.0 pence per ordinary share on May 5, 2026, subject to shareholder approval at the AGM on April 28, 2026.
• Continue to implement the strategy focused on disciplined growth, leveraging simplification, and active balance sheet and risk management.
• Integrate Evelyn Partners following the announced acquisition, expected to complete in summer 2026, subject to regulatory approval.
• Expand support for first-time buyers with a £10 billion commitment in 2026.
• Grow Premier Banking customers to one million and treble the number of Retail Banking customers investing to over 500,000.
• Invest in modern, intuitive digital experiences to reduce the cost:income ratio below 40% by 2028.
• Accelerate strategy to be the bank of choice for Startups, a leading hub for the UK Innovation Economy, and the top bank for UK mid-market corporates.
• Continue to invest in technology to make banking simpler and strengthen customer relationships, including AI-enabled tools and enhancing Bankline.
• Strengthen balance sheet and risk management with flexible capital allocation, dynamic pricing, and expanded distribution capabilities.
• Monitor and address the impact of Basel 3.1 reforms, expected to increase RWAs by approximately £10 billion on January 1, 2027.
• Continue to enhance and develop climate risk modelling capabilities, including internal physical risk modelling, in 2026.
• Oversee the completion of actions to enhance the approach to new internal control declaration requirements under the UK Corporate Governance Code throughout 2026.
• Provide a spotlight on engineering workforce plans and future skills during 2026.

Key Dates

Recommendation

NatWest Group's 2025 results demonstrate exceptional financial health, with significant profit growth, strong capital generation, and a substantial increase in shareholder returns through dividends and planned buybacks. The company's strategic focus on digital transformation, customer-centric growth, and sustainable finance positions it well for future success. Despite a slight increase in loan impairment rate, the overall credit quality remains robust, and efficiency improvements are evident in the declining cost-to-income ratio. The positive outlook and proactive management of regulatory changes further enhance its investment appeal, making it a compelling 'strong buy' for investors seeking both growth and income.

Keywords

NatWest Group, Banking, Financial Results, SEC Filing, Form 20-F, Profit, Dividends, Share Buyback, CET1 Ratio, Return on Tangible Equity, Net Interest Margin, Customer Deposits, Loans, Risk-Weighted Assets, Climate Finance, Digital Banking, UK Economy, Financial Services, Corporate Governance, Risk Management, Cybersecurity, Litigation, Regulatory Compliance