NatWest Group PLC

Good morning and thank you for joining us today. As usual, I'm here with Katie, who will take you through the full year performance. After that, I'll talk about our strategy and our new 2028 targets. But first, let me start with an overview of 2025, a year in which we delivered another strong performance and made good progress on each of our strategic priorities. Highlights of the year include a return to private ownership in May, opening a new chapter for the bank with a focus on driving growth. Continued organic growth together with successful completion of the Sainsbury's bank transaction. Improving operational leverage with a reduction in our cost income ratio of 4.8 percentage points. Together with strong capital generation, enabling total distributions to shareholders of 4.1 billion. You will also be aware that we announced the acquisition of the financial planning and investment firm Evelyn Partners earlier this week, which I'll talk about later. So let's turn to the headlines. We added a million new customers during 2025 and delivered broad-based growth across all three businesses. Lending grew 5.6% to 393 billion. Deposits were up 2.4% to 442 billion. And assets under management and administration increased 20% to 58.5 billion. This activity resulted in strong income growth of 12% to £16.4 billion. Costs grew 2% to £8 billion, resulting in positive jaws of 10%. The cost-income ratio reduced to 48.6%. This led to operating profit of £7.7 billion and attributable profit of £5.5 billion. Earnings per share grew 27% to 68 pence, dividends per share increased 51% to 32.5 pence and tangible net asset value per share was up 17% to 384 pence. Our CET ratio was 14% and return on tangible equity was 19.2%. As you can see here, these results are either in line with or above our strength and guidance. Our strong risk management is evidenced by a loan impairment rate of 16 basis points and total distributions announced in 2025 of 4.1 billion, comprised buybacks of 1.5 billion and dividends of 2.6 billion, in line with our payout ratio of around 50%. This includes the buyback of $750 million announced on Monday, along with our acquisition of Evalyn Partners. These results continue our track record of delivering value for shareholders. Over the past four years, earnings per share have more than doubled, growing at a rate of 26% a year. Dividends per share have more than tripled, increasing at a rate of 33% a year. And TNAV per share has grown 41% at a rate of 9% a year. At the same time, our share count has reduced from over 11 billion to just under 8 billion. Turning now to our three strategic priorities, I'll start with discipline growth. We now serve over 20 million customers across our three businesses, and 2025 marks our seventh consecutive year of growing customer balances. In retail banking, our customer base increased by more than 5% and customer assets and liabilities grew 4% to 421 billion. This includes the addition of around a million new customer accounts from the Sainsbury's transaction, which contributed to our unsecured stock share growing from 6.4% to 7.2%, including an increase from 9.7% to 10.6% in credit cards. In mortgages, we increased our flow share of first-time buyers from 10% to 12% and of the buy-to-let market from 3% to 6%. We are also extending our reach through NatWest Boxed, which provides embedded finance to companies such as the AA and Saga. In private banking and wealth management, over 50,000 customers invested with us for the first time in 2025. Net new flows to assets under management grew 41% and assets under management and administration increased 20% to $58.5 billion. AUMA is now 49% of client assets and liabilities, up 4% points on the prior year, and customer assets and liabilities grew 10% to $119 billion. In commercial and institutional, we extended our expertise in FX to a further 700 mid-market customers during the year, many of them via online platform for FX, Agile Markets, where the number of users grew 13%. This contributed to FX revenue growth of around 20%. Lending balance growth was strong at 10% or $14 billion. We lent 4.6 billion to the UK social housing sector, where we reached our 7.5 billion ambition ahead of schedule, and have announced a new 10 billion ambition for 2028. We are also the leading lender to UK infrastructure projects, and we delivered 19 billion of climate and transition finance towards our 2030 target of 200 billion, of which 16 billion was in commercial and institutional, I'd like to turn now to our second strategic priority, bank-wide simplification. We continue to invest to improve customer experience and increase efficiency. During the year, we made gross cost savings of around 600 million, which is over 7% of our 2024 cost base. And we created 100 million of investment capacity in 2025 to reinvest and further accelerate our transformation. taking a look at each business. In retail banking, our award-winning app has a net promoter score of 51. And as we continue to invest to improve customer experience, we launched more than 100 new features during the year. We also launched generative AI enhancements in our digital assistant Quora. As a result, the number of queries that can be resolved has increased by 20 percentage points. the cost-income ratio in retail banking decreased from 50 to 45%. In private banking and wealth management, we doubled the number of enhancements on the app, increasing our rating on the App Store to 4.4 and our Net Promoter Score to 54, up from 50 at our spotlight last June. In addition, we are leveraging group capabilities to simplify our operations. For example, we re-hosted our core banking platform from Switzerland to the Group Data Center in the UK. And we are co-locating our people with other NatWest teams. So we are relocating our tech team from Switzerland to the UK and India. The cost-income ratio in private banking and wealth management reduced 10 percentage points to 64%. In commercial mid-market banking, we are investing in our digital platform Bankline to give customers a single point of access to a wide range of products. We have now integrated our asset finance, invoice finance, payments, commercial cards, FX and trade platforms within Bankline. And customers accessed products via Bankline around 300,000 times last year. We also took steps to reduce our legal entities and branches in Europe. The cost-income ratio in commercial institutional reduced from 52% to 49%. Turning now to our third strategic priority, managing capital and risk. We generated 252 basis points of capital during the year, supported by reducing RWAs by 10.9 billion through capital management. This includes five significant risk transfers in commercial and institutional and a two billion mortgage securitization in retail banking. We have a high quality lending book in all three businesses with a low level of impairment at 16 basis points of loans. And all this enables us to recycle capital into areas where we have chosen to grow. The successful implementation of our strategy gives us the ability to invest in the business, support customer growth and deliver attractive returns to shareholders. As I mentioned earlier, we have announced total distributions of 4.1 billion for 2025, representing 75% of attributable profit. With that, I'd like to hand over to Katie to take you through our financial performance.

Thank you, Paul. I'll start with our performance for the full year, where, as Paul said, we have either met or exceeded our third quarter guidance. Income, excluding all notable items, was up 12% at £16.4 billion. Total income included £241 million of notable items. Total operating expenses were 1.4% higher at £8.3 billion. and the impairment charge was 671 million or 16 basis points of loans. Taken together, this delivered operating profit before tax of 7.7 billion and profit attributable to ordinary shareholders of 5.5 billion. Our return on tangible equity was 19.2%. Turning now to the fourth quarter compared with the third, income excluding all notable items was up 2.5% at 4.3 billion. Operating expenses were 2.2 billion, including the annual bank levy. The impairment charge was 136 million, or 13 basis points of loans, bringing operating profit before tax to 1.9 billion. Profit attributable to ordinary shareholders was 1.4 billion. Our return on tangible equity was 18.3%. Turning now to income. Full year income, excluding notable items of 16.4 billion, exceeded our guidance of around 16.3. Across the three businesses, income grew by 1.8 billion. This was largely driven by higher net interest income as balance sheet growth and the benefits of the structural hedge more than offset the impact of the Bank of England rate cuts. Net interest margin was up 21 basis points to 234 basis points, mainly due to deposit growth coupled with margin expansion. Non-interest income grew 1.3%, reflecting solid customer activity as we supported their investment, FX and capital requirements. Turning to the fourth quarter, income excluding notable items grew 2.5% to 4.3 billion. Across our three businesses, income increased by 2.8%, or 116 million. Net interest income grew 4.5%, or 148 million, reflecting the trend over the year of volume growth alongside margin expansion. As a result, net interest margin was up 8 basis points to 245 basis points. Non-interest income across the three businesses was down 3.7%, mainly driven by commercial and institutional, reflecting typical seasonality after a strong third quarter. Turning to 2026 guidance, which excludes the impact of Evelyn Partners. We expect income excluding notable items to be within a range of 17.2 to 17.6 billion pounds. And our current forecast is within this range. Turning to growth. As you heard from Paul, our three businesses have a strong track record of growth over the last seven years. We have grown customer lending at 4.5% a year. This includes broad-based organic growth, as well as acquisitions, which support scale and underweight areas such as mortgages and unsecured lending. Customer deposits have grown 3.9% a year, supported by a boost during COVID, as well as new propositions and an improved digital offering. AUMAs have grown at 12% a year and have more than doubled since 2018. These three elements together make up Customer Assets and Liabilities, or CAL, which has grown at 4.6% a year. We focus on this metric as it reflects the breadth of balance sheet solutions we offer to meet customer needs. This track record gives us confidence that we can continue to grow CAL in the future, and Paul will talk more about our 2028 target shortly. Let me take you through the last year for each of these elements in turn. We delivered another year of strong lending growth. Gross loans to customers across our three businesses increased 5.6%, or £20.9 billion, to £392.7 billion. There was broad-based growth across mortgages as we increased our flow share of the first-time buyer and buy-to-let markets, with strong retention as well as new business flows. Unsecured lending growth was supported by the addition of Sainsbury's bank balances and the first full year of our personal loans offering for the whole of market. In commercial and institutional, we grew in all three businesses with lending up 14 billion or 10% excluding the repayment of government loan schemes. This reflects our leading position as the UK's biggest bank for business with growth across social housing, residential commercial real estate, infrastructure, project finance and funds lending. I'll now turn to deposits. Customer deposits across our three businesses increased 2.4% to £442 billion, with a stable mix throughout the year. Retail banking deposits increased £7.8 billion or 4%, reflecting growth in savings and current account balances, supported by balances acquired from Sainsbury's Bank. This includes growth in the fourth quarter of 6.8 billion, reflecting strong growth in savings of 6.4 billion, supported by our limited edition saver and term products, and growth in our current accounts of 0.4 billion. Private banking and wealth management increased by 300 million in 2025, also reflecting growth in current accounts and saving balances, with progress driven by both deeper engagement with our existing customers and new customer acquisition. And CNI deposits increased 2.3 billion, reflecting growth within large corporates and business banking. Moving now to assets under management. We are pleased to see the plans we talked about in the June spotlight delivering for our customers and shareholders. AUMAs increased almost 20% this year to 58.5 billion. And net flows of 4.6 billion were up 44%. fee income from higher AUMAs grew 11% to 300 million. Moving now to the continued tailwind from our structural hedge. As you will be aware, in addition to our product structural hedge, we also have a longer duration equity structural hedge. Together, they are 198 billion in size, 4 billion higher than last year, and are an important driver of income growth. In 2025, product hedge income was 4.2 billion. This is 1.2 billion higher than the previous year and 3.2 billion higher than 2021. Our equity hedge income was almost 500 million pounds, which is around 50 million pounds higher than the previous year and around 25% more than 2021. The yield on both hedges has increased significantly over the last few years as interest rates rose. This slide shows our expectation for future yield progression based on our current macroeconomic assumptions and hedge durations, together with associated income growth. We expect yield to increase from 2.4% in 2025 to around 3.1% in 2026, with further increases thereafter. Our illustration here assumes steadily increasing average notional balances for both the product and equity hedges, driven by growth in CAL and higher levels of capital held to support that growth. This expectation of increasing yield and notional balances drives higher annual income through to 2030. We are sharing our expectations for this year and next as more of the near-term income growth is locked in. We expect 2026 total hedge income to be around 1.5 billion higher than 2025 and for 2027 to be around 1 billion higher than 2026, reaching total income of around 7.2 billion pounds. Exactly how this develops will be subject to the prevailing reinvestment rates each year, as well as the composition of growth in CAL. Turning now to costs, other operating expenses were 8.1 billion, including one-time integration costs of 96 million, in line with our guidance. We are pleased with our delivery of around 600 million of gross cost savings, which has allowed us to invest in business growth and accelerate our simplification programme. Costs grew 1.8% if you exclude one-time integration costs. Our cost income ratio reduced to 4.8 percentage points to 48.6%. In 2026, we expect other operating expenses to be around 8.2 billion. Staff costs will be a key driver of overall cost growth. We also make significant investment in the business each year with a range of initiatives to drive operating leverage. We expect further supplier contract inflation and increased business transformation costs this year. Delivery of around 8.2 billion in 2026 will be supported by another year of significant gross cost savings. Turning now to our updated macro assumptions. Our base case outlook for the macro environment in 2026 assumes moderate growth, slightly lower than our previous year. The unemployment rate increased slightly above our expectation for 2025 and we now expect this to peak in 2026 at levels we are comfortable with in terms of lending risk appetite. We also expect inflation to come down at a slightly faster pace given the most recent print. and we expect lower rates reaching a terminal bank rate of 3.25% by the end of 2026. Our balance sheet remains well provisioned with expected credit loss of 3.6 billion and ECL coverage of 83 basis points. We are comfortable with 1.1% of Stage 3 loans, which is down on the prior year, reflecting management actions in our personal portfolio, together with lower defaults in our non-personal portfolios. Our remaining post-model adjustments for economic uncertainty are £246 million, broadly stable on the third quarter. We will continue to assess these provisions each quarter and release as appropriate. Our latest scenarios also show that even if we were to give 100% weight to our moderate downside scenario, this would increase stage one and two ECL by 54 million pounds. I'd like to turn now to the impairment charge for the year. Our prime loan book is well diversified and continues to perform well. We're reporting a net impairment charge of 671 million, equivalent to 16 basis points of loans. There were no significant signs of stress across our three businesses and impairment levels across our products have performed broadly in line with our expectations. In 2026, we expect our loan impairment rate to be below 25 basis points. This guidance is not dependent upon post-model adjustment releases or any material shift in risk appetite. It's simply a reflection of normalisation in impairments and lower one-off releases, as well as growth in the book and ongoing changes in the mix. Turning now to capital. We ended the year with a common equity tier one ratio of 14%, up 40 basis points on last year. In 2025, very strong capital generation of 252 basis points took our CET1 ratio before distributions to 16.1%. Distributions accounted for 213 basis points of capital, including accruals for our ordinary dividend payout of around 50% and our buyback of £750 million that we announced on Monday. Risk-weighted assets increased by £10.1 billion to £193.3 billion within our guided range. 3.8 billion of higher operational risk weighted assets includes 1.6 billion in the fourth quarter as we brought forward our annual operational risk recalculation from the first quarter in 2026. You should now expect us to include this in the fourth quarter each year. 11.1 billion of business movements broadly reflects our lending growth across the year. This was largely offset by a 10.9 billion reduction from RWA management, including 5.7 billion in the fourth quarter. So in essence, our actions this year have funded the growth in our lending book. Other movements include 7.3 billion from CRD4 model inflation, of which 4.8 billion was in the fourth quarter. We think we are now largely done, though we await PLA approval of our models. There was also 1.2 billion of other risks and effects movements. Going forward, we expect a further impact on RWAs with the implementation of Basel 3.1 in January 2027. Based on our latest recalibration of a higher balance sheet, we currently expect this to increase RWAs by around 10 billion pounds. The majority of the RWA uplift from Basel 3.1 is due to operational risk and the removal of the SME and infrastructure support factors. We do expect an offset in our Pillar 2 requirements at the same time for these elements, but the net result will still require us to hold a higher nominal amount of CET1, given the offsets are at a total capital level. We also expect future growth to consume more capital in the form of RWAs. Despite this, we are confident in our ability to continue generating strong capital from earnings and to manage risk-weighted assets, and we are guiding to capital generation of around 200 basis points before distributions in 2026. Turning now to our CET1 ratio. Our CET1 target of 13 to 14% has been in place since 2019. As you know, we've been actively looking at this over the last year or so. Today, our minimum CET1 requirement stands at 11.6%. And as you know, there are no changes to the capital requirements in the latest FPC review, so our supervisory minimum remains 11.6%. And we expect this to reduce further with the implementation of Basel 3.1 next year, with a reduction in our Pillar 2 requirement, as I just mentioned. Today we are holding considerably more capital despite de-risking. The successful restructuring of the bank is evident from the consistent and material improvement in our Bank of England stress test results. The performance of the business has materially improved and we have demonstrated a track record of strong earnings, high capital generation and returns. So as a result of all of these considerations and taking into account the views of stakeholders, including investors, rating agencies and regulators, we are reducing our CET1 target to around 13%. This represents a healthy buffer over our MDA and supervisory minimum requirements and also reflects the expected reduction in Pillar 2 requirements on the 1st of January, 2027. Turning now to our acquisition of Evelyn Partners. As we outlined on Monday, we see a strong strategic rationale for this acquisition. It brings 69 billion of AUMA scaling our private banking and wealth management to 20% of Group Cal, a third growth engine for the Group. It increases fee income by almost 20% on day one. And ultimately, it makes us a faster growing, higher returning bank with higher distribution capacity for shareholders. Operationally, it is deliverable. Culturally, we are aligned. And financially, it delivers for shareholders. So let me show you how we expect to deliver a return on invested capital above that generated via a share buyback by year three after completion. We provided you with Evelyn Partners' 2025 Income, Costs and Earnings Before Interest, Tax Depreciation and Amortisation, or EBITDA. Revenue synergies include bringing Evelyn Partners' broad range of financial planning and wealth management solutions to all our customers, enhancing our D2C investment offering via Best Invest, leveraging Evelyn Partners technology for portfolio management solutions and providing Evelyn Partner customers with our full range of banking solutions and combined wealth management offering. The business has grown AUMA at more than 7% a year for the last two years and bringing the combined capabilities to our customer base of more than 20 million is a significant opportunity to create value. The benefit of being part of NatWest Group should deliver income greater than 700 million. We expect to realise around 100 million of cost synergies by removing duplication in shared services and technology applications, where there is high alignment between our platforms as well as efficiencies of scale. the cost to achieve of approximately 150 million will be phased over three years. This means we expect costs to fall in absolute terms to less than 300 million by year three. Together, this drives EBITDA of around 400 million, When assessing the transaction, we look at the returns accruing to capital. In other words, the return on invested capital. We do not include the amortization of purchased intangibles since amortization does not flow through to capital and does not impact our distribution capacity to shareholders. The cost of intangibles are taken in the day one impact of around 130 basis points on the CET1 ratio. Amortization is included in return on tangible equity. This is a capital light business with very high returns on tangible equity, clearly accretive to the group in year one and beyond. Beyond year three, we see further improvement in returns driven by compounding net new money growth, driving higher assets under management and ultimately stronger income growth. Turning now to returns. This shows the drivers of return on tangible equity in 2026. The notable items in 2025 income and tax credits, which together account for around 1.3 percentage points of ROTI. Clearly the year on year change in some P&L lines will impact ROTI more than others, with income growth being the biggest driver. Naturally, the level of return will also be impacted by growth in the denominator, average tangible equity. This will be driven by earnings, balance sheet growth and further unwind of the cash flow hedge reserve. Overall, in 2026, we expect to deliver a return on tangible equity of greater than 17%. So to summarise our guidance. Excluding the impact of Evelyn Partners' acquisition in 2026, we expect income, excluding notable items, to be in the range of £17.2 to £17.6 billion. Other operating expenses to be around £8.2 billion. The loan impairment rate to be below 25 basis points. capital generation before distributions of around 200 basis points and a return on tangible equity greater than 17%. With that, I'll hand back to Paul. Thank you.

Thank you, Katie. So you've heard about our guidance for 2026. I'm now going to talk about our plans for the next three years and 2028 targets, which include the impact of the Evelyn Partners acquisition. You will be familiar with this slide as you've heard about each one of our three businesses over the past year in our investor spotlights. We are building on strong foundations with a customer base of more than 20 million and leading positions in each of our businesses, all of which deliver attractive returns. Our retail bank has a track record of growing share profitably with an opportunity to align areas such as mortgages, savings and unsecured lending more closely with our 16.5% share in current accounts. Private Banking and Wealth Management has a leading private bank with a strong brand and acts as a centre for excellence within the group for investment products and solutions. With the acquisition of Evelyn Partners, a market-leading financial planning and investment management firm, we are creating the UK's leading private bank and wealth manager. The combination increases asset under management and administration to $127 billion and Cal to $188 billion. It both transforms the scale of the business and the breadth of our financial planning and investment offering to meet more customers' needs across the group. further accelerating growth in assets under management. Commercial and institutional is the UK's biggest bank for business with a 25% share of deposits and 20% share of lending. We are a leading bank for startups in the UK with the largest presence in the mid-market sector where we see significant opportunity. The scale and strength of our customer franchise gives us a strong base to build on with plenty of capacity for further growth. We believe the macro economy in the UK provides a supportive environment. Consumers in aggregate are managing well. You can see here that households are paying down debt and savings rates are high. Despite a challenging environment, particularly for sectors such as retail and hospitality, UK corporates are delivering and investment is steadily increasing. In addition, there are reasons to feel confident about the broader economy. In the housing market, interest rates are coming down, the government has set ambitious building targets and is committed to investing in social housing. There is a huge shift of generational wealth to younger generations underway, whilst the FCA's Advice Guidance Boundary Review opens up an opportunity for thousands of people who currently receive no financial advice. and the UK is home to high growth sectors and businesses with an innovation sector that is growing faster than the UK economy. It's against this backdrop that we have been thinking about our strategy and 2028 targets. Our strong performance in recent years demonstrates that our strategy is working. However, we revere it on an ongoing basis and have refined our three priorities as we raise our ambition for the bank and target a 2028 return on tangible equity greater than 18%. So let me talk about each priority in turn. We remain committed to pursuing disciplined growth with an emphasis on returns. First, by focusing on key customer segments. Second, by making it easier for customers to engage with us. And third, by broadening our propositions to ensure we serve more customers' needs. Our second priority has evolved to become leveraging simplification, reflecting the advances and progress we have made. We will continue to invest, in particular in AI, to drive growth, improve productivity, and enhance the customer experience. and we will continue to manage our balance sheet and risk well by redeploying capital to drive returns and by putting a greater emphasis on dynamic pricing as we increase our speed and agility with more advanced data and analytics. The purpose of these priorities is to deliver growth and attractive returns for shareholders. Our increased ambition on returns is underpinned by three new targets, growing customer assets and liabilities at an annual rate greater than 4% from 2025 to 2028, reducing our 2028 cost income ratio to below 45%, and generating more than 200 basis points of capital before distributions whilst operating with a CET1 ratio of around 13%. These targets take into account the acquisition of Evelyn Partners. So let me talk more about how we aim to achieve this, starting with disciplined growth. In retail banking, our focus is on youth, families, and the affluent segment. In the youth market, we are building on the success of our Rooster Money app, which has grown its customer base 15 times to well over half a million. We bank one in three families in the UK and want to build on connections within families and households through savings and mortgage relationships, for example. We also have a clear opportunity to grow in the affluent segment. We have around 1.2 million affluent customers in the retail bank, yet just half a million use our premier proposition. So our aim is to grow our premier customer base to 1 million and treble the number of retail customers who choose to invest with us. The Evelyn Partners acquisition will help accelerate the delivery of this ambition. It both enhances our direct-to-consumer investment platform with Best Invest and broadens our financial planning and investment offering. Private banking and wealth management aims to increase the number of clients with more than 3 million of assets and liabilities by more than 20%. This will be supported by trebling the number of referrals from commercial and institutional. In commercial and institutional, we want to remain the leading bank for UK startups and for the commercial mid-market. We serve over one in four businesses in the mid-market segment, businesses that are growing at a higher rate than the UK economy. We have an unparalleled presence across the UK, enabling us to build deep relationships based on strong local and sector knowledge. and we are building on our position as a leading lender to UK infrastructure and UK social housing, as well as our strength in trade and climate and transition finance. Our second lever to deliver growth is making it easier for our customers to engage with us by combining our best technology with the support of our people. In retail, most customers bank digitally, but we also have over 1,000 personal bankers and relationship managers, with a 24-hour call service for Premier customers. Private Banking and Wealth Management has 250 advisors and specialists in QOOTS, together with an award-winning app supported by QOOTS24, which answers calls 24 hours a day. Evil in Partners adds 270 financial planners, 325 specialist investment managers, and its own direct-to-consumer investment platform, Best Invest. Again, it combines expert personal service with digital excellence. commercial and institutional as a digital platform bank line, an unparalleled network of around 1,000 relationship managers in commercial mid-market banking, and a network of 12 accelerator hubs around the UK to help entrepreneurs grow and scale their businesses. We continue to invest in enhancing the digital experience for customers as technology advances and expectations evolve. For example, we are transforming our digital assistant Cora by deploying generative AI so that it can resolve more complex customer needs. We are moving our data onto a single platform to deliver more personalized propositions. And in commercial and institutional, we are investing 100 million over several years to transform Bankline into a state-of-the-art digital platform, giving business customers a single point of access to many of our products and services. Ultimately, we want a joined-up experience which adds value for the customer, however they choose to engage with us. We also want to meet more customers' needs by broadening our offering. For retail banking, this includes areas like home buying, with more support for first-time buyers, with family-backed and shared ownership mortgages, offering more flexible savings accounts, developing tailored propositions for Premier customers, and entering point-of-sale lending. Private banking and wealth management is primarily focused on investments. We are broadening our investment proposition to attract both high net worth clients and customers in the retail bank. We are preparing our response to the FCA's recommendation for targeted support following their advice guidance boundary review. And we are broadening our deposit offering. In commercial and institutional, we see the UK innovation economy as a key opportunity. Last year, we created a dedicated venture banking team to support innovative venture-backed scale-ups. And we opened new business accelerators last year with four leading universities, which act as incubators, with a plan to expand this to 10 over the next two years. By continuing to deliver disciplined growth, our aim is to grow customer assets and liabilities across our three businesses at a rate greater than 4% a year, equivalent to more than $120 billion of balance sheet growth by 2028. This will be a mix of broad-based lending growth, higher customer deposits, and strong growth in assets under management and administration. We have already demonstrated our track record of growth. Retail banking makes up 44% of our customer assets and liabilities, where we have grown more than 5% a year over the past seven years. Private banking and wealth management is currently 13% of Cal, with a strong growth rate of 8.3%. This will grow to around 20% of Cal with the inclusion of Evalyn partners. And commercial and institutional represents 37% of Cal, with a growth rate close to 3%. Moving on now to our second strategic priority, leveraging simplification, where I'll start with architecture and data. We expect to drive a further 100 million of investment capacity in 2026 by leveraging technology together with further streamlining our processes and governance. We have already made significant progress simplifying our systems and reducing duplication. For example, we decommissioned 200 business applications across the group last year, and we successfully migrated 1 million customers from Sainsbury's Bank covering multiple products. Last year, we announced a collaboration with Amazon Web Services to accelerate our data, analytic, and AI capabilities. This collaboration will give us a single view of each customer's relationship with the bank, as well as the tools to analyze data and enrich our customer understanding. Deployment of AI is not only helping us to automate routine work, such as call summarization, it is also helping our coders to be more productive. Over 12,000 software engineers are now able to use AI assistance to generate code. This transformation has enabled us to improve the deployment frequency of updates across the group by more than four times since 2021, and more than treble the new features on our commercial banking digital platform, Bankline. This investment is also increasing our operational resilience. We have reduced the number of critical incidents from nine in 2021 to one last year. Our ambition is to become the leading bank delivering personalized customer propositions powered by the responsible deployment of agentic AI. So we are building out our capabilities across the bank. Last year, we set up an AI research office focused on improving customer experience and efficiency by accelerating the use of AI in fields such as multi-biometrics, audio-visual conversational AI, using proprietary small language models, and ensuring algorithmic fairness as well as data safety. This shift to agentic AI marks a transition from simple chatbots to autonomous systems that can execute complex banking workflows on behalf of our customers. By prioritizing these capabilities, we can move beyond basic automation towards a simpler, data-driven experience that meets rapidly evolving customer expectations. Many of the building blocks that will make this vision a reality will go live this year. This quarter, our customers will be able to ask questions about their recent spending in their own words on their app. And later this year, we will launch voice-to-voice conversations and more agentic fraud support. By delivering income growth ahead of cost growth, we expect to reduce our cost-income ratio below 45% by 2028. Our track record of tight cost control gives us competitive advantage as it enables further growth. So our ambition is to strengthen our position as the most efficient large bank in the UK. Turning now to our third strategic priority, active balance sheet and risk management. The strength of our capital funding and liquidity position provides significant opportunity to deliver continued balance sheet growth together with attractive sustainable returns for shareholders whilst operating with a CET1 ratio of around 13%. Our loan to deposit ratio of 88% demonstrates the strength of our three businesses and our capacity to deliver material lending growth to support our customers and the UK economy. We continue to recycle inefficient lower returning capital into attractive growth areas to drive higher returns and we have been active in significant risk transfers and credit risk insurance to increase capital efficiency. You can also expect to see a greater emphasis on the use of advanced data analytics to drive faster pricing, credit, and asset enablement decisions. In addition, data analytics will help us manage risk dynamically whilst optimizing risk-adjusted returns. We will continue to deliver our through-the-cycle cost of risk of 20 to 30 basis points aligned with our risk appetite. And we also want to maintain our market-leading position in customer fraud prevention with multi-biometric authentication. Our aim in pursuing disciplined growth, leveraging simplification and managing capital and risk is to drive strong growth and returns for shareholders. Given our strong track record of delivery, we are raising our future ambitions. So let me sum up with our 2028 targets. We aim to grow customer assets and liabilities at a rate greater than 4% a year as we continue to drive disciplined growth. We are targeting a cost-income ratio below 45% as we drive positive operating leverage and we aim to generate more than 200 basis points of capital before distributions whilst operating with a CET1 ratio of around 13%. Strong capital generation gives us the ability to support customer growth, invest in the business and deliver attractive returns to shareholders. We are targeting a return on tangible equity greater than 18% in 2028. And we expect to maintain our dividend payout ratio of 50% with scope for surplus capital to be returned via buybacks. Thank you very much. We'll open it up now for questions.

We will now take your questions. If you would like to ask a question today, you may do so by using the raised hand function on the Zoom app. If you are dialing in by phone, you can press star nine to raise your hand and star six to unmute once prompted. Today's call will last one and a half hours. We ask that questions are limited to two per analyst to allow more people to ask questions. We will pause for a moment while we give everyone an opportunity to signal for questions. Our first question today comes from Shiel Shah from JP Morgan. If you'd like to go ahead and ask your question.

Hi, Shiel. Hi, Shiel. Hi, guys. Great. Thanks for the questions. I've got two, please. Firstly, on costs. The 600 million of cost saves that you've seen in 2025, could you talk about where that's come from and how we should think about the level of cost saves coming in 2026, particularly with regards to some of the technology developments? that you've spoken about and should we be thinking about a cost growth towards the out years of around a sort of a 2% level going forward? And then secondly, in terms of the greater than 4% customer assets and liabilities target, I was wondering if you can disaggregate this across the divisions and maybe more specifically, would you expect all of the business areas to be at this target level? And, you know, I may be sort of pointing at the corporate business here, looking that it is slightly below target in recent years. So I'm just wondering whether you expect to pick up in this business. Thanks.

Thanks, Sheil. Appreciate it. So Katie, I'll talk generally about cost. You maybe want to come in around the outer years on costs. And then I'll cover the cow piece as well. So Sheil, first of all, I'd say we're very pleased with the momentum in the cost line. obviously a nearly 5% reduction in the cost income ratio this year. That's 20% plus over the last four years. So it feels like we've got a really good flywheel going in terms of driving out efficiencies and productivity in the business, reinvesting some of that capacity, but making the bank more productive and more efficient going forward. In terms of your question around what levers are we pulling, it's a really broad range of levers, I would say. A key part of it is the got a historic and current tech investment that's driving a lot more digitization, automation. We continue to decommission a lot of applications. We've consolidated a lot of platforms. So that's really helping. We've also become a lot more efficient in how we do change. We talk about that in the presentation, 100 million of benefits. In effect, we can do more change at lower cost, which is great for the customer, but also great for the cost outlook. And we're also continuing to simplify the business more generally, Sheil. So property consolidation would be one, organizational simplification, legal entities, etc. So there's a whole range of costs, a whole range of levers. And that's why for 28, we've said less than 45%, but we still, and we see opportunity beyond that because we're very comfortable that this flywheel is heading in the right direction. Katie.

Sure. Thanks very much. So look, Sheila, as I looked at it, obviously operating costs, 8.2 billion in for next year. It's very much, as Paul says, it's that ongoing cost savings that we have. the higher investment spend on data and tech, as well as the higher business transformations and the benefits that we're seeing on that. We do expect, as you wouldn't be surprised to hear me say, to continue our really cost-tight management as we go out into 2028 and really ensure that we're getting the benefits of that investment spend and that they are realised. We do expect positive jaws in each year. We've brought in the cost-income ratio target of below 45%. versus the very strong 48.6% we've already printed for 2025. That target does include the costs and, of course, income from Evelyn Partners, including our ongoing investment in that business. And I would say if I had to look beyond 2028, I would expect to see further improvement in that ratio from here as well. So, as ever, a very tight cost picture.

Great. Thanks, Katie. And then, Shiel, on your second broader question around Cal or customer assets and liabilities, we're not going to give you the exact, you probably don't expect it, the exact kind of split of growth. But what I'd encourage you to think about is we're very confident about growing across all aspects of Cal, lending, deposits, assets under management. Given it's a three year cycle, we're going to push hard to grow where the opportunities present themselves. Obviously the environment will change, so different opportunities will be attractive at different times. I do think it's reasonable to expect that some areas will grow faster than others. As you alluded to, if you look at our growth over the last couple of years, assets under management have typically grown at a higher KGAR, so 12% on average over the last seven years. Evelyn will obviously accelerate that, given the compound growth in that business of 7%. On lending, I'd say a broader picture, Sheil, very confident we capture, I mean, historically, NatWest is a lending and credit franchise, and we can capture demand when it's there. So I'd expect us, you know, lending growth across mortgages and retail unsecured, but also as you can see the growth in the commercial institutional markets. lending book in 25, you know, 14 billion up, 10% up. So we're not going to give you the breakdown, but I would plan across both lending, deposits, and AMA, and we're very confident that it will be greater than the 4% each year target for 28. Thanks.

Our next question comes from Benjamin at Cavern Roberts of Goldman Sachs International. Benjamin, if you'd like to go ahead and ask your question. Morning, both.

Thank you very much for the presentation and the questions. So just wanted to ask a first one on profitability and a second one on the hedge. So if we look at the 19% return on tangible in 2025, I know there were a few factors which helped that result, including very low impairments, strong markets result, higher average bank base rate than likely in future years, and a slightly lower effective tax rate than is modeled by consensus for the medium term. But aside from those, And what would you call out as factors that you might see as being less favorable year on year in 2026 or elements of conservatism that effectively contributes the sequential decline in roti. On the lower end of your 2026 guidance, but differently, is it fair to think of underlying roti is continuing to go up from here and then secondly on the hedge tailwinds through to 2030. Has anything changed in the structure, duration or notional assumptions of the hedge to facilitate that very strong uplift in 26 and 27 and then the continued uplift through to 2030? Thank you.

Thanks, Ben. Katie, do you have your order?

Yeah, no, absolutely. So I'll start off with ROTI. So obviously, looking to our ROTI guidance of greater than 17% in 2026, you can see that we've got a record of high teens percent returns in there. So I wouldn't get too focused on the underlying versus this and that kind of coming in. We're very confident on delivering on this guidance. You know, we did have a little bit of a boost in the year, but things come in at different points. I think the important thing to remember is that we will continue to build capital both through this year as we get to the end of 2026 with Basel 3.1 coming in on January the 1st. That's an extra 10 billion of revenue capital along there. And then alongside our P&L guidance, you should expect that average growth coming through on the tangible equity as well, which kind of is what pulls your roti back a little bit. It's important not to forget that. But obviously also it's guiding you on the strong capital generation that we can see coming through. And there will be the movement during the year of 130 bps as we have CET1 coming in. But overall, I guess as I look at the number, there's not one thing I would say, look at that as a negative or a drag particularly, but I would encourage you to think of Cal Growth and how it feeds through to the TNAV growth. If I then kind of take you on to the hedge in terms of where we are and how it's kind of structuring as we go forward from here. Look, when we look at the hedge, You know, there's a number of different things that we kind of bring in, bring into that. One of the debates we've been having is around that hedge duration and what we've been looking at. We are very stable at 2.8 years. It's important to reflect, to remember that that reflects the product hedge at two and a half years and the equity hedge at five years, which is obviously five and ten in kind of duration. We spend a lot of time looking at the behavioural life of different deposit types, different cohorts across the deposit franchise of our three businesses. We're very happy to see the deposit stability and the growth over this last year. We look obviously backwards, but we also look forwards in terms of what we're expecting there. We give consideration of how things might evolve in the future as we go forward from here. So conversations you'd expect us to be having around things like digital currencies, stablecoins, tokenized deposits, as well, of course, the absolute competition that we see in this market. We continue to dynamically monitor that and assess that over time and how we reinvest the hedge at the different lifetimes. And I think the other thing that's important that I'm not sure you all think about enough as well is also the relative size of both of those hedges in terms of how they sit and what that then does to your kind of this averaging out of the age of the hedge. I'd say one thing in addition, we do review our hedging instruments. You know, as gilts have repriced, we have actively been reinvesting our maturing 10-year swaps into 10-year gilts, which provides the pickup in yield that contributes about 50 million additional income from the equity hedge in 2025. Very comfortable with the approach we have. While it feels kind of mechanistic and we talk about it as that a lot, it doesn't. has a huge amount of thought that goes into the background to make sure we deliver the really quality returns that you see coming from this hedge year after year. Thanks, Ben.

Very helpful. Thank you.

Thank you, Katie. Thanks, Ben.

Our next question comes from Robert Noble of Deutsche Bank. Rob, if you'd like to go ahead and unmute and ask your question.

Morning. On Evelyn, did you look at anything else in the space as a potential acquisition? There are listed wealth managers that trade at lower uh low multiples so what makes this specific one worth a premium compared to others if i could ask about um ai as well there's been a route in the market this week and wealth managers and then more generally across the last kind of few months could you talk specifically about the risks from ai in this space and then if we could broaden it out to uh traditional banking what risk do you see from ai on deposit spreads particular or or any other material risk that you see in banking from AI as well. Thanks.

Thanks, Rob. So we got evil in AI in wealth, and then more broadly on on, I guess, AI impact on banking. Okay. The first question, as you'd expect, Rob, you know, we monitor a number of participants and actually have done for a number of years. As you alluded to, there's, there's private entities, there's listed entities, there's different business models. In terms of Evelyn, we absolutely thought it was the right fit for NatWest. Very strategic acquisition, creating one fell swoop, the number one combined private bank and wealth manager in the UK. It transforms our wealth business, increases the scale of it 2x from an assets under management perspective. And most importantly, or as importantly, it brings key capabilities that will complement our proposition. a direct to consumer platform, Best Invest, the largest employed financial advisor network in the UK, and a broad suite of investment products and propositions. So it was the combination of the scale, Rob, but also the capabilities that it brings. And it positions us, I think, excellently for what is obviously going to be a growth area over both the short, medium and long term. We know that customer demand is increasing around financial planning, financial advice. As you see, intergenerational wealth transfer, that's only going to increase. I think it's an area that's going to be amplified by tech and AI, and I'll come back to that because I think it's going to make advice more accessible and more affordable. And it's obvious we have helpful regulatory tailwinds as well, whether that's the FCA's advice, guidance and boundary review, whether it's the targeted support developments, which will drive advice to more people that start in April. So for us, it felt like the right partner, the right capabilities, creating a really substantial private bank and wealth management to complement the number one business bank we have. In terms of the broader picture on AI and wealth management, that's been on our minds for banking. It's obviously been on our minds in the context of wealth as we thought about the wealth space over the last couple of years. I actually think the winners in the wealth space in respect of AI will be those who have scale and have data. When you think about 20 million customers that NatWest has, that's 200x the times of Evelyn. So the ability to use that scale and data, I think AI is a big accelerant and opportunity. Secondly, what all the customer research and customer insight tells us, both independent and our own, is that the winning combination is going to be a combination of, I guess, AI-driven digital wealth advice, but also expertise through humans and people for those big financial decisions, the complex aspects of financial planning. So to me, you bring both together, you see AI really helping us get closer to our existing customers in the wealth space, which is great, but also access new customers at relatively low marginal cost. but then combined from a hybrid perspective with excellent advisors for the more complex financial needs. So that's how we think about it. So net-net, we think AI will be an accelerant and a winner, and we'll be a winner in terms of our wealth aspirations. And we think the customer need is really this hybrid need. And then more generally on AI, it's already affecting the sector. We've embraced it from a colleague perspective and a customer perspective. I think it's going to change how customers engage with us or how they find us and discover us. I think what it plays to is, again, my point around scale. I think the winners here will be those who've got significant size customer bases, 20 million for us, a longstanding relationships, data. So you can bring products, propositions, whether directly to your own channels or through other channels. I think that's who's going to be successful. And we're very thoughtful about that in terms of how we're building our capabilities. Hope that gives you quite a big picture on all those big topics. Thanks, Rob. Thank you.

Our next question comes from Amit Gol of Mediobanker. If you'd like to unmute and ask your question.

Hey, Amit. Hey, Amit.

Hi, thank you, and thanks for taking my questions. So the first question is just on the broader capital generation targets. So one's more of, well, part of it's just a clarification. When we talk about the circa 200 BIPs for 2026, I guess, does that exclude the BOL 3.1 effect, which comes 1st of Jan 2017? um or or is that in there um and and more broadly just looking at the 2028 capital generation target um you know greater than 200 bits um and just curious it seems to be um you know on the low side especially if i think about the kind of roti target greater than 18 so You know, just if you can talk to, you know, your ability to meet or beat or how you reconcile the two. And then just the second question, just a shorter follow up. But when we talk about the circa 13 percent CT1 target going forwards, is that a level where you'd be happy to operate, you know, one quarter or the other quarter with a 12 target? kind of handle starting point or is it basically you look to be at 13% plus throughout your kind of operating period on a quarterly basis?

you thanks amit uh so let me knock two of them off pretty quickly so on the uh cap generation yes it excludes the first jan 27 increases from ball three so hopefully that gives you the clarity there we've also said that we we believe that will be around circa 10 billion so x is the answer there on the third question or the full or the kind of sub question on on cet1 and 13 percent Obviously, we've been thinking about that for a couple of years. It's around 13%. So the way I would think about it is it's not a hard floor. So that's the way to think about it. And then on the broader question of 28 and capital generation, a couple of things. One is It's important to remember it's on a growing balance sheet, so it includes the growth that we've talked about. So please bear that in mind. And I guess just a bit of context. Obviously, you can see 19% roti this year. You can see the capital generation above 250 basis points. That's our third year of greater than 17% roti. It's on a balance sheet that continues to grow to the compound rate. And we need to you need to bear that in mind when you think about capital generation going forward. And that obviously flows through to EPS, DPS and higher TNAV for sure. So that's how I would that's how I would think about that. And as ever, you know, we're very clear. You know, our target is you can see how we position our targets. You know, the intention for twenty eight is to be greater than 200 basis points. Hopefully gives you a good picture. Thanks. Thank you.

Our next question comes from Christopher Kant of Autonomous. Christopher, if you'd like to unmute and ask your question.

Hey, Chris. Hey. Good. Thanks for taking the questions. If I could ask one on RWAs, please. So really pleasing to hear the detail around how you're expecting to grow. I think that's an important part of the story, but obviously you're now talking about this CAL concept for growth, which makes it quite hard for us to think about the capital intensity of growth, obviously capital intensity of AUMA or deposits within that number, quite different to lending growth. You can ask this new guide on the Basel IV RWA impact, which I think is probably a bit above where consensus was. So if I could just invite you to comment on the consensus RWA expectations, I think we're at 223 in 2028. That would be appreciated just so we can sort of understand how you're thinking about the RWA piece of the puzzle. And then on rates assumptions, please. Your base rate assumption is 3.25% flat. Fair enough as a planning assumption. Could I just understand what reinvestment rates you're assuming on the hedge is? within those gross income increments you've given us. Given the flat base rate assumption, I assume you're assuming a fairly flat swaps curve or a reasonably low reinvestment rate. Thank you.

Very clear, Chris. Thanks. Katie.

Sure. Thanks very much. So if I deal first of all with your kind of RWA outlook kind of point, I guess as we look ahead, 2026 has obviously been underpinned by the discipline balance sheet growth that we've got, the increase in regulatory clarity, as well as the kind of further active kind of management but the primary driver will be the lending growth. One of the slides we have included in the appendix pack is I think on slide 57, a bit of a detail on risk density to show you that the risk density of lending is stable. However, the volume will increase. So therefore your volume of RWAs will follow through in that. And so you need to kind of bear that in mind as you go through. There could still be a couple of small additional impacts from CRD4 in 2026. We think that's largely done. But obviously our models are in that final stage with the PRA and there can be a little bit of movement as you get them kind of finalised. I would also expect to see some further RWA management. I would say we've had a really stellar year this year on RWA management. So I wouldn't necessarily pop that number into your model at quite that kind of high level. But it's something you will continue to see as you move forward from here. And then if I go to the hedge and in terms of that kind of reinvestment yield that we see, as you know, we talk a lot about the tailwind that's coming through on the hedge. And if I look at our current economic assumptions, of the five-year average swap reinvestment rates, 3.5% in terms of the product hedge and the 10-year gilt reinvestment rate of 4.5% over the next five years. So we do expect that hedge to deliver on an annual year-on-year tailwind into 2030. The second thing you need to think about as well is not just those rates, but also the size of the hedge. You know, we are assuming an increasing notional balance coming through. So we're 198 in 2025. We expect that to grow to 200 billion in 2026. And then I expect it to grow steadily as we move forward to 2030, supported by that cow growth. Obviously, some of that will be going into the hedge eligible deposits and others will be into the increasing size of the equity hedge. Now, Chris, if you were standing with me, you'd probably say, okay, do those rates feel a bit low? If I were to mark them today, they'd be a little bit higher. That's a fair statement. And I kind of accept that. However, kind of sitting where we are today, I'm comfortable with the rates for our base assumption. You know, we'll see that as it comes through. But overall, we are really confident of this tailwind that we see coming through on the hedge in the next couple of years, but also all the way out to 2030. Thanks very much, Chris. Thanks, Katie. Thank you, Chris.

Our next question comes from James in Vine of Rothschild & Co. Redburn. If you'd like to go ahead and ask your question.

Hi, good morning, Paul. Good morning, Katie. Good morning, James. I've got a couple, please. The first is on the guidance. Sorry, the revenue guidance, that is. So if we start with your 16.4 billion revenue that you printed for last year, you guided to the hedge being an extra 1.5, so we're up to 17.9. There's decent balance sheet growth, so that's another tailwind for that. I know you've talked about Bank of England rate cuts, but I think from what I can see, the second one only comes right at the end of the year. So I was just wondering what other headwinds you've got kind of factored into the 2026 revenue growth, please. And then the second one is just on costs. So Paul, I think on one of your slides, you talked about doubling the number of coders to 12,000, but also the AI is now writing about a third of their code. So you know, from here, what are you expecting for where that number of coders needs to go? I can see, you know, reasons for why it might go up a lot, but also why it might come down a lot. So I'm just wondering what your view is, please.

Great. Thank you, James. Do you want to take income 26?

Yeah, sure. Let me kick off. Thanks, James. So as we look at that kind of guidance, 17.2 to 17.6, we're very confident on it. We will deliver in that range. And if you look at it, what we will be delivering is a kind of 5% to 7% top line growth. So very good. Let me help you a little bit on a little bit of your maths. There's a couple of things within there. First of all, and the most important thing in reality is It's customer activity. And where we kind of land in that range is going to be very dependent upon that kind of activity, I would say. But we have a strong multi-year track record of growth. You can see the growth we're talking about this morning, what we've delivered in 2025, and we'd expect that to continue. as we move into 2026. Obviously, the mix will ultimately contribute into the income contribution. You're aware, we may talk about it more this morning as well, the little bit of pressure that there is on mortgage margins at the moment. We talked about that at Q3. And there's also some continuing competitive pricing going on in the savings products. The second bit is on rates. Two rate cuts. They're actually penciled in my forecast in April and October. So Q2 and Q4 as they come through. So they will have a little bit of an impact. However, I think you've also got to remember that we're not at the start of the rate cutting journey. We're quite some way through it. So if you think of our sensitivity, we give you year one, we give you year two and year three. The way I think about that number, it's a kind of negative 500 number. against that positive of the hedge coming through because you've just got the cumulative effect of those rates coming through. So I would bring that in. And the third thing I would think about, you heard me talk already about the RWA management action. They do come at a cost. And as I look into 2026 numbers, I would say the additional cost of the RW actions that we've done would be an extra kind of 100 million as well. So I would take that off. And that will get you very nicely into the range that we're talking to you about the 17.2 to 17.6. And we're very confident that we're going to be able to deliver that. So thanks, James. Hopefully that helps. Paul, shall I hand back to you?

Thanks, Katie. Shifting gear to quite a different topic. I guess engineering and productivity of software engineering, James, is something we spend a lot of time on as a management team. It's definitely a topic du jour. And it's pretty obvious the AI developments have been transformational for us. All our engineering and coding teams have got access to AI tools. As you alluded to, we have around 12,000 engineers and That's been increasing over a number of years, but now we're at a situation where circa 35% of the code is written by AI. So I think over time, there will be choices around how you use that capacity. I think it's still an evolving picture. We've got a couple of quite exciting pilots running in two of our businesses, in our international business and also in our financial crime area, where we're, I guess, what we call doing fully agentic press play software. And that's actually delivering 10x productivity gains. So that's where you've got agentic workflows, autonomous agents, they're planning, building code, testing code, but obviously then overseen in a responsible way by a human. So this, this space is, I think, I think, you know, exploding pretty quickly. And I think it's inevitable. There'll be a change both in the, in, in the profile of let's call it engineers in terms of the activities that they do. And then I think there'll be some choices about how you capture that productivity benefit. Do you capture some of it to go faster, you know, deliver more products and services to your clients and enhance the customer proposition? Or do you also see opportunities for, you know, do we also see opportunities for productivity and efficiency? And I think all other things being equal, that's a reasonable expectation over the short to medium term that there'll be some productivity and efficiency opportunities moving forward. Hopefully that gives you a flavour for it, but very excited by the work that's going on there. But we are very mindful that we're a regulated industry and we're doing it in a very responsible and thoughtful way. Thanks, James.

Lovely. Thanks both.

Thanks, James.

Our next question comes from Aman Rakhar of Barclays. Aman, please go ahead.

Hey, Aman.

Hello, hopefully you can hear me both. We can hear you clear. Thank you so much. I had a question actually back on Evelyn. So yeah, I guess the market reaction to Evelyn has been what it is and coming in a backdrop of broader cross currents. But the feedback I've been getting is around potential execution risk around the deal. So I was kind of interested in your take around your confidence and your ability to kind of integrate this business and also extract value from it. If you could bring a bit more to life around perhaps the revenue synergy and the degree of confidence that you have that in two years' time will get me looking back and thinking this is a good deal. And the kind of related question is a repeat of a question from earlier this week. But could you kind of help us with your assumptions around attrition? I think that is potentially a key unknown variable here. How are you thinking about attrition risk in the investment practitioners and what kind of strategic actions are you going to have to take to ensure that, you know, that your, your staff, but also your customers kind of don't leave. If you could help us with that, I think it would really help. Thank you.

Great. Thank you. And man, so, uh, let's, let's start with integration, uh, now come on to, to revenue synergies. And then we'll talk a little bit around, uh, I guess the value creation and ensuring we, we retain both, uh, critical people, but also customers on integration, uh, very high confidence amount we've known the business and tracked the business for a number of years we know people obviously we know people in the business so we know that we know evil in very well we've undertook quite extensive due diligence around it uh whether that's the tech platforms whether that's the cultural alignment uh there's been a lot of investment uh since the i guess original combination of the business in in 2020 into the tech capabilities we've seen the to all intents and purposes, the tech and op integration is complete. The benefits of those investments are actually now coming through for Evalyn. There's a lot of congruence and alignment between the underlying platforms that our QOOTS business use and Evalyn uses. That gives us confidence about we know the platforms, we know the systems, we have experts on both sides of the transaction who know those platforms and systems. So we feel very confident about that. And what we also have on both sides of this transaction, we have experienced people who've done M&A transactions and integrations. We've got our very recent experience and the team still on the park around the Sainsbury's acquisition. We've complemented that over the course of the last 12 months with individuals who've been involved in some really significant FS M&A activity over the course of the last 12 months. Obviously, given Evelyn's history, they've built experience there as well, having to integrate different businesses. So we feel pretty confident around that, what I call that alignment around integration and the ability net-net to create a lot of value out of that. So that's integration, high conviction, high confidence. On revenue synergies, I guess we could talk a long time about that. Big picture, though, I think the really critical thing to remember here is there's a really big opportunity in helping a lot more people to save and invest for the future. We've got these regulatory tailwinds, which you know about, the financial advice gap. we also know that in the wealth industry despite the historic kind of cautious investment culture we've seen mid to high single digit growth in aum if you look at our own business we've seen 12 compound growth you know in assets under management uh if you look at our 2025 performance 20 growth in auma net new money of 8.4 so that's the big picture that gives us i get i guess a sense of confidence if you look at the drivers of income growth. You look at Evelyn's track record, over 7% since 2023 in terms of AUMA growth. And then on top of that, we've got the revenue synergies. So where do they come from? Three big opportunities. Best Invest, it's a really significant upgrade to our NatWest Invest digital platform. We have the opportunity to bring that to life for our 1.2 million Premier customers and our 19, 20 million customers in retail. The breadth for the Best Invest offering versus our current offering is incomparable. At the moment, NatWest Invest has five funds. You've got 3,000 products with Best Invest, 19 funds versus five funds, access to US equities, UK equities, ETFs, investment trusts. Plus we have a relationship with those 19 million customers and the ability to surface these opportunities through the app. So that's the first big kind of, I'd say, opportunity. Then you look at the excellence that Evelyn has in terms and the scale it has in terms of financial planning and the biggest advisor employed advisor network in the country. Again, we can bring that to our 1.2 million Premier customers. We can bring that to our high net worth customers in Coutts. Again, the breadth of the proposition really adds to the, I guess, the wealth waterfront that we have in our Coutts business and 2X in terms of our Premier business. And then the third synergy is obviously, if you look at what Coutts has, you look at what NatWest has, we have a range of banking products, lending and banking, that we can bring and support Evelyn clients with. So you don't have to make very, when you work it through, as I'm sure you have, Aman, you don't have to make very big assumptions to see where the opportunities are, both in the underlying growth rate of the business, but also in the revenue synergies and opportunities that there are. And that's why we're very high conviction on this from a strategic perspective and very high conviction that value creation in both the short term and long term will be significant. Thanks, Amman.

Our next question comes from Jonathan Pearce of Jefferies.

Jonathan, please go ahead. Hello.

I've got two questions, please. Apologies if I've missed an answer on this already. I've had a few issues this morning. The first is on tangible equity. really looking at consensus out to 2028. There's lots of moving parts, I guess here versus what consensus might've been thinking before. So Evelyn, which sit down, lack of buybacks, push it back up. You're now talking about a bit more growth than people had in the 33.4 billion of average growth. tangible equity consensus has in 28. How are you thinking about that? Is that an appropriate number to be applying the greater than 18% to, or could that be a bit higher? than that. That's the first question. The second question is on the hedge. Can I just confirm that I heard correctly on the equity hedge that you're now showing the income from the equity hedge as though it was invested in 10-year gilts rather than 10-year swaps? Because that obviously is going to give you a better yield and a better tailwind than if it was swaps. And you've obviously dropped the disclosure on the maturity yield on the product hedge. I just want to get a sense as to what that is in 2028, please, because obviously if the notional is growing, all else equal, the hedge income is going to grow, but I'm not sure that is a sort of underlying feature. What's the maturity yields, please, on the product hedge in 2028? Thanks. Thanks, Jonathan. Katie?

Sure. Thanks very much. Morning, Jonathan. So as we look, first of all, at the kind of the TNAV question, I think it's important to look at the kind of T, the Evelyn versus share buyback and things like that. Evelyn was a capital allocation conversation as far as we're talking about in terms of TNAV. So it actually has no impact on your 2028 TNAV. And by that, I mean, if we hadn't done even, we'd distributed the capital because our belief is to distribute excess of your capital to you. So it was already out of that TNAV calculation. When you think of the TNAV, it's really Cal you've got to think about. And within there, obviously, specifically loan growth. there's a little bit of unwind of the cash flow hedge. But if you think of our loan growth that we've done over the last number of years, we've been consistently above 4% within there. I could use that as a good proxy for TNAV if I was you. So therefore, I would say as I look at my number versus your number, and I try not to compare myself to consensus, I would probably guide you to that 4% a little bit and kind of lift up a little bit as you go through. I know you're absolutely right as well. If I move on to the hedge, we have over this last while as we look as part of our kind of, you know, management of the hedge is to sort of say where are opportunities and so we have moved some of our equity hedge into gilts and so because we felt we were getting a better return there and we can absolutely see that return coming through in terms of the the extra 50 million that we report within there. You know, the equity hedge is 25 billion in size. It's not by any means all in gilt, something we've just started to do relatively recently. But we'll continue to, we suspect to continue that move as we see the kind of gilt return being that bit better than the swap return. We're not particularly constrained on the size of that. I would discourage you from then saying, oh, they'll start to do that on the product hedge. We won't, just because it's a very different beast. We've got a lot of natural kind of product offset that we see within there, but it definitely is helpful to us in terms of that delivery. And Jonathan, I'm going to disappoint you a little bit and not give you the numbers that I've chosen not to disclose this morning. But you can sort of see that what we have given you is that combined yield. We've also given you the numbers as we go through. I know that one of the questions that has been going around is around actually that redemption yield and what it looks like specifically in 2028. So if I look at the kind of 2028 redemption yield for the structural hedge, it's slightly below 4%. And currently we do see 20 is the kind of peak. I know it's always a favorite analyst term, the kind of peak redemption yield level. But we see that falling down into 29 and 30. I would say it's the only year that we do see that that the redemption yield being above our reinvestment yield. And the difference is probably 30 to 40 bps on that number. However, I think really importantly, there is a reason that we don't worry about this. It's more than offset by the compounding benefit of the hedge reinvestment over 2026 and 2027. And of course, the expected increase in our hedge nominal over the period, again, in line with our CAL guidance. And that's just why we are really comfortable about this annual income tailwind that we see through to 2030. I hope that helps you without giving you the exact numbers you're maybe searching for.

Yeah, it's very clear. Thank you very much. Thanks, Jonathan. Thanks, Katie. Thanks, Jonathan.

Our next question comes from Guy Stebbings from PNB Paribas, if you'd like to go ahead and ask your question.

Hi, good morning. Hey, Guy. Hi there. The first one was going back to the income guide for 26, but really focusing on net interest income. I mean, I appreciate you don't spit out the guidance as such, but if we think about non-interest income, perhaps broadly similar to 25, maybe a bit of growth as per consensus, so we'll pull up 3.6, then it looks like you're thinking about an NI around 13.6 to 13.9. Q4, you're already sort of analysing within that range, just so I just want to check, is that the right way to think about it? And you're not really anticipating a lot of ni growth versus the q4 annualized run rate and that rate cuts i guess um less than lost an eye from srts or mortgage return could you know almost fully offset uh the hedge and and volume growth feels a touch conservative so i just want to check my thinking there um and then on rate sensitivity um You're now talking to an increase to 157 million on the managed margin sensitivity. I think that's listening to 60 percent deposit pass through. I appreciate the competitive reasons. You're not going to say exactly what you're assuming in the future, but maybe you could talk about how that's that's trended in particular in terms of the December rate cut. I'm not sure, Katie, you mentioned something about a buildup of rate sensitivity as time progresses. I'm not sure if that was sort of related to this point or something else. So perhaps you could elaborate. Thank you.

Thanks, Guy. If I miss any of them, Guy, come back in, forgive me. So I guess as we look at the interim income guide, my first guidance would be, and you've heard me say this before, try to look at the three businesses. You remember that in the centre, we've had a lot of sort of movement between non-interest income and NII. And that kind of, if you just take the total NIN number, that does kind of confuse it a little bit. We talked a little bit about Q3 that we'd put in some hedge accounting to help resolve that. And what you will see as we go through the next few quarters is you won't see those big flips kind of going from NII to non-NI, which is why I would say really look at the three businesses. We are confident on the Q3. momentum that we see in the underlying customer activity and the underlying momentum we have in the business. But we would expect to see non-interest income across the three businesses growing into 2026 from here as well. If I look then to the rate sensitivity, we've issued new ones today. The change in the amount is very much reflective of the size of the balance sheet as well. We work on a 60% I would say broadly, when you look across a number of rate cuts, we're definitely, we're in that sort of space as we come through from there. So that's not particularly changed. And I think that's a good proxy for you to continue to work on. And then I think your last point was very much around the income. and you've got this what's happening on the rate sensitivity so you if you look to 2026 income what we've got is the impact of the rate cuts that we had in 2025 you'll now have a full annual impact of those And then I've also got two rate cuts in 2026, April, October, as I said earlier. When I look at those and kind of do my kind of maths on them, I kind of see them as a drag of 500 million against the kind of income numbers that we've got through there. Obviously going against the hedge, which is adding 1.5 billion. So still strong growth. But that's what I was talking about in that part. It wasn't specifically on pass-through and things like that or our traditional rate sensitivity disclosure. Hope that helps. And I think I got it all.

Hopefully we captured everything there, guys. Thank you.

Thank you very much. Our last question today comes from Ed Firth from KBW. Ed, if you'd like to unmute and ask your question.

Morning. Yeah, thanks very much. Yeah, I had two questions. One was on detail. You mentioned that one of the reasons for the I guess reasonably cautious income expectations from 26 was the cost of capital actions. I just wondered if you could give us roughly some idea of what was the quantum you're assuming in that, because obviously that was a big driver of risk management assets from 25. And to get a guide for 26, if that would be helpful. And then I guess the second question was, You, in common with a lot of banks, you would put up the AI slides and the tech slides and lots of talk about 10x of this and massive reductions in that. And yet, when I look at the cost expectations for the sector as a whole, the actual efficiency improvements in terms of cost to loans, cost to risk-making, they've barely moved in the last four or five years. And expectations are to be barely moving, going forward as well, a few basis points here and there. and so i mean are we ever going to get this to a quantum shift in the cost of delivering banking that we're talking i mean and i mean not just like inflation or above like in theory the unit cost of delivering banking products should go down massively uh with the digital delivery and yet we don't ever seem to be seen and so i'm just wondering you're thinking is there a time like post-28 when we can suddenly see this transformation? Or do we have to accept that actually you're just replacing cheap branch staff with expensive software engineers? Thanks very much.

Thank you, Ed. Okay. Quickly do income and then I'll give my thesis on efficiency.

You'd expect me to say this. I would say to you that our 2026 income guidance is certainly very reasonable and not cautious. I think I've given you the maths and all the building blocks as to how you can see that. In terms of the specific question on the cost of the capital actions, what I said earlier is you should think in your model of a negative 100 in 2026 in terms of that additional cost. They make great sense to do. You can see that we actually, in effect, paid for all of our lending with those capital actions, and that's taking off lower performing capital and replacing it with higher performing. So we're really pleased with the performance of the business on that piece. But think of it as an additional 100 million. And Paul, would you like to?

I meant in terms of risk-weighting assets, what sort of reduction do you get for that 100 million?

So in terms of that, so I think the numbers there is 10.9 billion, which was what we took off this year. I'm struggling to remember the number from the previous year, but I think it was around 7 billion in that series. And that's the kind of level that we've seen. Those are multi-year transactions. So some of that risk-weighted assets will roll into 2026. Obviously, there's a little bit of unwind within there. And then we'll do some further transactions in the year as well.

Thanks, Katie. And then, Ed, on your question around, I guess, unit cost over assets as different to or versus cost-income ratio, that's actually something as a management team we spend time on because we do think that's a very valuable and useful lens. I think you can see by the numbers we've shared today, the cost-income ratio has come down. part of that is income going up. But the reality is the absolute cost base has only gone up a little bit, well below inflation, well below wage inflation. The targets we've set out imply less than 45%. That makes us the most efficient large UK bank. So by definition, our expectations are that Costs will continue to be well managed. And I've signaled today, I think Katie said it as well, and we see opportunity beyond 28 to go beyond that. I do think there genuinely is a significant change going on where you can see a business model, an operating model changing. that operates at a much lower cost base with a higher income base that drives, obviously, greater returns and equity, but also we'll start to see the unit cost over assets because you've got the growth coming through reduced as well. Time will tell where that plays out, but I think what we've laid out today, and I do believe we've got this flywheel of cost efficiencies going well. Time will tell, but I do think we've got very good momentum in terms of improving the underlying kind of unit cost base of the bank. So as you say, I mean, we'll get there, but that's how I think about it. We use both lenses. Thanks, Ed.

Thank you for your questions today. I will now like to hand back to Paul for closing comments.

Yep, that seemed to go quickly. So thank you everybody for joining us for the second time this week. As you've heard, we've delivered a very strong performance in 2025, continuing our track record of growth on both sides of the balance sheet and fees. Very attractive returns for shareholders. Our total distributions for the year were 4.1 billion. That includes the 750 million share buyback we announced on Monday alongside the acquisition of Evelyn Partners. That creates the UK's leading private bank and wealth manager. And we're very excited by that because it gives us another growth engine for the group. So hopefully you've seen from today's numbers. We're ambitious for the business. We've set out new targets and we're determined to deliver returns greater than 18% in 2028. Thank you. Have a good weekend.

That concludes today's presentation. Thank you for your participation. You may now disconnect.