Lending Momentum and AI-Led Efficiency: NatWest Drives Earnings Beat (NWG Q1 2026 Earnings Call)

By Dr. Graph | Updated on May 26, 2026 | earnings

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NatWest Group delivered strong operational performance in the first quarter of the year, driven by resilient loan expansion and significant progress in scaling artificial intelligence to optimize its operations.

Strong Operating Leverage Powers Earnings Growth

NatWest Group started the year with robust operational momentum. Earnings per share grew 15.5% year-on-year to 17.9p, reflecting healthy underlying profitability across its core businesses. Revenue expansion during the quarter also helped the bank lower its cost-to-income ratio to 46.5%.

Macroeconomic Revisions Drive Upgraded Full-Year Income Guidance

Management upgraded its full-year expectations due to a higher-for-longer interest rate environment. Paul Thwaite stated, "With rates staying higher for longer, we now expect full year income to be at the top end of the GBP 17.2 billion to GBP 17.6 billion range." This updated projection excludes the pending Evelyn Partners wealth management acquisition.

The bank also maintained its return on tangible equity target of greater than 17% for the year. Additionally, Katie Murray noted that the bank expects around 200 basis points of capital generation before distributions. She also projected operating costs to remain around GBP 8.2 billion.

Lending Momentum and AI Integration Scale Operational Efficiency

Lending activity drove the operational beat during the quarter. Commercial and Institutional segment loan balances grew by GBP 3.8 billion due to green finance and infrastructure demand. The bank also onboarded 24,000 new U.K. start-ups, which represents a 25% year-on-year increase.

NatWest actively integrated artificial intelligence to improve software development productivity. Paul Thwaite noted that over 40% of the group's software code is now written by AI. He highlighted that a team of 7 agents can deliver new customer propositions in just 6 hours.

Navigating Mortgage Spreads and Macroeconomic Credit Re-Provisioning

During the analyst Q&A session, management discussed mortgage margins and credit provisions. Katie Murray explained that mortgage book margins are expected to reprice to around 60 basis points over the year. Additionally, NatWest took a GBP 140 million provision to reflect revised macroeconomic scenarios.

Frequently Asked Questions

What was NatWest Group's return on tangible equity performance in the first quarter?

The bank achieved a return on tangible equity of 18.2% in the first quarter of the year. This strong profitability was driven by high margins and loan volumes across its businesses.

How did customer deposits perform and what seasonal factors impacted them?

Customer deposits grew 2.6% year-on-year to GBP 445 billion. While the Commercial & Institutional segment saw a deposit increase of GBP 5.1 billion, this was partially offset by seasonal outflows in Retail and Private Banking due to customer tax payments of GBP 10.3 billion.

What is the expected credit loss sensitivity under NatWest Group's moderate downside economic scenario?

If the bank applied a 100% weight to its moderate downside scenario, the Stage 1 and Stage 2 expected credit losses would increase by GBP 99 million, representing a 2 basis point increase in coverage.

How did average interest-earning assets change in the quarter?

Average interest-earning assets decreased 0.2% sequentially in the first quarter. This reduction reflects the optimization of surplus liquidity, including the repayment of GBP 4 billion of government funding at the end of the prior year.