NatWest shares edge higher as bank lifts 2025 profit targets

NatWest Group PLC shares rose 3% after the bank upgraded its 2025 income forecast to approximately £16.3 billion and its return on tangible equity target to above 18%, driven by strong third-quarter performance. The lender reported a Q3 profit attributable to shareholders of £1.6 billion, up from £1.2 billion year-over-year, with a 22.3% return on tangible equity and an improved cost-to-income ratio of 47.8%. This performance, supported by stable deposits and continued lending growth, reflects consistent operational delivery and robust capital generation, reinforcing the bank's positive outlook.

Analysis

NatWest Group PLC shares responded positively, rising 3% following the bank's upgraded 2025 financial targets. The lender now anticipates 2025 income, excluding one-off items, to reach approximately £16.3 billion and a return on tangible equity (RoTE) above 18%, both exceeding prior guidance. This upgrade signals management's increased confidence in future performance and operational strength.

The revised outlook is underpinned by robust third-quarter results, where profit attributable to shareholders climbed to £1.6 billion from £1.2 billion year-over-year, yielding a strong 22.3% RoTE. Total income, excluding notable items, increased by £200 million to £4.2 billion, driven by consistent lending growth of £4.4 billion and strong customer activity. The cost-to-income ratio improved significantly to 47.8% from 52.8% a year ago, reflecting operational efficiencies.

Despite a £1.1 billion slip in deposits, the loan-to-deposit ratio stands at a healthy 88%, supported by a solid average liquidity coverage ratio of 148%, well above regulatory requirements. The core equity tier one ratio strengthened to 14.2%, indicating robust capital generation. The bank's assets under management also grew 8.1% to £56 billion, boosted by client inflows, further diversifying revenue streams.

The CEO highlighted "consistent delivery and capital generation" as key drivers. The bank's plan to outline new 2026 guidance and 2028 targets in February suggests a strategic roadmap for continued growth and shareholder value creation, reinforcing a positive long-term outlook.

Key Decisions for Investors

• Consider a bullish stance on NWG given the upgraded 2025 financial targets, strong Q3 earnings, and improved operational efficiency.
• Monitor the bank's upcoming 2026 guidance and 2028 targets in February for further insights into long-term strategic direction and growth potential.
• Evaluate the sustainability of lending growth and deposit trends, especially the slight deposit slip, while acknowledging robust liquidity and capital ratios.