NatWest Group PLC

Good morning and welcome to NatWest Group's H1 2026 results management presentation. Today's presentation will be hosted by CEO Paul Thwaite and CFO Katie Murray. After the presentation, we will take questions.

Good morning, everyone, and thank you for joining us. Our results today show how we've created a bank with increasing momentum through our focus on sustainable growth and returns. By delivering growth across all three businesses, improving operating leverage and managing our capital and risk, we have created the most efficient large UK bank with the lowest cost of risk, delivering the strongest capital generation and highest returns. Our ambition for the future is founded on the strengths we've created and the opportunities we see ahead. The UK's next phase of growth will be shaped by a handful of defining trends, so we have built leadership positions in areas that will drive the next decade, such as wealth, AI and infrastructure. Our performance makes clear we have the capability and capacity to grow at scale. So we're seizing the opportunity to maximise our position as a trusted partner for customers and to help stimulate growth across the UK. In February, we set out how we plan to deliver our 2028 targets by pursuing disciplined growth, leveraging simplification and actively managing our capital and risk. Our aim is to grow customer assets and liabilities at an annual rate of more than 4%, to reduce our cost-income ratio to below 45%, and to generate over 200 basis points of capital before distributions, with a return on tangible equity of more than 18%. Our strategy is delivering excellent results as we make good progress against these ambitions, so let me give you the financial headlines. We have deliberately built a scaled business that benefits from structural UK growth drivers to deliver strong returns on a sustainable basis. Our return on tangible equity was industry-leading at 19.7%. Our acquisition of Evelyn Partners has now completed and boosts our exposure to the fast-growing UK wealth market. Customer assets and liabilities grew 13.4%, including Evelyn Partners. And assets under management and administration increased more than 150% to $131 billion. Excluding Evelyn Partners, Cal grew 5.2%, well above our target of more than 4%. We continue to drive operating leverage. Income growth of 8.9% is significantly ahead of cost growth of 4.5%. And our cost-income ratio reduced 2.8 percentage points to 46%, getting close to our 2028 target. Strong operating leverage together with a low cost of risk has driven 23% growth in earnings per share to 38 pence with a 26% increase in our interim dividend to 12 pence and a 13% uplift in TNAV per share excluding Evelyn Partners. We also generated high levels of capital at 137 basis points and our balance sheet remains strong with a CET1 ratio of 13.2% after the acquisition of Evelyn Partners. Given the strength of our performance and our confidence in the outlook, we are upgrading our 2026 returns guidance to more than 19%. Our strong capital generation has allowed us to invest in growth and acquire evil in partners while still having surplus capital. So we are bringing forward the points at which we consider buybacks by six months to the year end results. You can see from the distribution of cow on this slide, that with the addition of VivaLim partners, we now have three scale businesses. Growth is broad-based and diversified across them. Each one shows increasing operating leverage and each one delivers industry-leading returns of 20% or more. All three businesses are well positioned to benefit from attractive structural growth opportunities and we are allocating capital dynamically to optimize risk-adjusted returns. Our retail bank has a strong track record of gaining share and attractive returns with a clear opportunity for further growth in key target areas. We now have the UK's leading private banking and wealth management business in a high growth market where regulatory change is accelerating customer demand. and Commercial and Institutional is capturing structural growth opportunities by building on its leading position in mid-market banking and in sectors such as infrastructure and social housing. So let me update you on our strategic progress. Our retail bank serves 19 million customers, or one in three UK families. We have an opportunity to continue growing in savings, investments and lending to align with our share of current accounts of over 16%. One way we are capturing this is by targeting growth in key customer segments such as youth, families and affluent. By strengthening our leading position in the youth market, we are creating the next generation of primary banking relationships and boosting our long-term funding base. We are building here on the success of our NatWest Rooster Money app. Its customer base has grown 18 times since 2021 and it has a leading net promoter score of 72. We increased the number of Rooster customers by 15% over the last year. We opened around 50% more junior ISAs and we enhanced our offer for teenagers with a new card and new features on the app. We also grew our share in savings and investments, mainly with Athlon customers, as we opened 20% more ISA accounts and attracted 32% more customers to invest with us. Peter John-Paul Thwaite, These inflows were supported by over 45,000 customers across the group investing with us for the first time, a 60% uplift on last year, as well as a 11% growth in the number of high net worth clients we serve with more than 3 million of assets and liabilities. This progress will be accelerated by the acquisition of Evelyn Partners, which I'll talk about on the next slide. Commercial and institutional is the UK's biggest bank for business. It serves 1.5 million customers across the UK, ranging from startups, where we have a leading 20% share, through the mid-market to large corporate and financial institutions. We gain a clear competitive advantage here from our longstanding presence across the nations and regions, as well as our highly experienced network of more than 1,000 relationship managers. They are rooted in their local communities, offering businesses both local knowledge and deep sector expertise. This enables us to play an important role in regional economies, giving us a distinctive platform to support investment and capture growth. We are capitalising on our market-leading positions in areas such as infrastructure, social housing and transition finance to take advantage of structural growth and building on our leading position in debt capital markets to support corporates, not just with lending, but with broader funding needs. We delivered £23 billion of climate and transition finance in the first half, making good progress towards our £200 billion 2030 target. All three businesses continue to leverage simplification to improve customer and colleague experience and drive efficiency. The use of AI is changing how our customers live and work, as well as their expectations of us. It is also reshaping financial services. While the pace is faster and the tools have evolved, the fundamentals remain the same. The real value of AI comes when it builds stronger customer relationships, strengthens trust, and delivers growth through better insight, experience, and outcomes. That's why we continue to invest in leading capabilities. Last year, we created a new AI research office to enable faster innovation and to accelerate our responsible deployment of AI. The benefits for both customers and colleagues are clear. A smoother customer experience, quicker, more informed decisions, and more time for colleagues to focus on what matters most. building trusted relationships and delivering better customer outcomes. So, for example, we are using AI to deliver new customer propositions faster in hours rather than weeks, to help customers understand their spending habits better, to help them resolve cases of fraud through natural language conversations with our digital assistant Cora, and to provide relationship managers with greater client insight and more capacity for productive engagement. The operational momentum in each of our businesses is demonstrated by operating profit growth of more than 15%. I'd like to turn now to the acquisition of Evelyn Partners. Evelyn Partners allows us to deliver an exciting step change in our private banking and wealth management business, generating sustainable growth and returns. We now have a highly differentiated, scalable, end-to-end wealth proposition, comprising advice, planning and investments, with the largest employed network of financial advisors across the UK and a highly regarded direct-to-consumer investment platform. The combination of planning and investment capabilities with banking, savings and wealth management services gives us a unique position in the market and a distinctive offering for our 20 million customers. One month in, Evelyn Partners is performing in line with expectations and the integration is going well. We were able to hit the ground running having plans since February and we're executing at pace with a focus on the most valuable revenue opportunities. We have a single leadership team under Emma Crystal. We have created an integrated financial planning team to take advantage of opportunities like targeted support and we're already seeing business referrals in both directions. So we're excited about the opportunity ahead and the value that Evil In Partners brings both for the group and for shareholders. We look forward to updating you further at an in-depth spotlight in the fourth quarter. Our strategy is focused on driving sustainable growth and returns, which in turn generates higher levels of capital, giving us both resilience and flexibility. So let me remind you of our approach to capital allocation. We have a robust balance sheet and aim to operate with a CET1 ratio of around 13%. giving us appropriate headroom above minimum requirements. Our strong capital generation enables us to invest in our business to grow and to deepen customer relationships. We are both disciplined and dynamic in our deployment of capital and our diversification across three businesses gives us optionality through the cycle to optimize risk-adjusting returns. We also apply a high bar as we consider acquisitions that accelerates our progress through additional scale or capabilities. Our strategy is delivering attractive and growing shareholder returns and we remain committed to a dividend payout ratio of around 50% and to returning surplus capital to shareholders via share buybacks. This translates into compounding growth in earnings, dividends and TNAV per share. Given the strength of our performance and the inclusion of Evelyn partners, we are upgrading our 2026 guidance. We now expect a return on tangible equity of more than 19% and we are bringing forward the date when we consider share buybacks to our full year 2026 results. The momentum we're seeing in customer growth, efficiency and returns gives us great confidence for the future. By driving disciplined growth, increasing our operating leverage, and managing our balance sheets and risk, we have created a business capable of delivering strong, compounding, sustainable returns through the cycle. With that, I'll hand over to Katie to take you through the results.

Thank you, Paul. I'll cover this second quarter using the first quarter as a comparator. Our strong performance in the first quarter continued in the second, with broad-based growth, income momentum and improved operating leverage. Income, excluding notable items, increased 5.4% to £4.4 billion and total operating costs grew 1.8% to £2.1 billion, driving a one percentage point improvement in the cost-income ratio to 45.5%. The impairment charge was £140 million, equivalent to 30 basis points of loans. This resulted in 12.4% growth in operating profit to £2.3 billion. Profit attributable to ordinary sharing on tangible equity of 21%. Thank you very much. Non-interest income grew 15% or £124 million, supported by strong customer activity in commercial and institutional, together with higher insurance-free income following our decision to partner with a new insurance provider. Looking forward to the second half, we expect an income contribution of around £275 million from Eveland Partners. Given the strength of our performance and the inclusion of Evelyn Partners, we now expect full-year income excluding notable items of around £17.9 billion. Turning now to Customer Assets and Liabilities, or CAL. We are pleased with our continued track record of growth and the addition of Evelyn Partners. CAL increased by £86.8 billion in the quarter, or 9.6% to £986.9 billion. This comprises £9.7 billion of broad-based customer lending growth, £2.8 billion of customer deposit growth and a £73.9 billion increase in assets under management and administration, including Evelyn Partners. I'll touch on each of these elements in turn. We're reporting another quarter of strong broad-based loan growth across the Group, with gross loans to customers up £9.7 billion. Retail banking and private banking and wealth management balances grew £4 billion, or 1.7%. This comprises £3.9 billion in mortgages and £0.1 billion in unsecured lending. Our mortgage stock share increased slightly in the quarter to 12.7%, with record applications in March. Commercial and institutional continues to be the fastest growing segment with lending up 5.7 billion or 3.6%. Within this, growth is the strongest for larger corporate and institutions where we see continued strong demand driven by structural trends including digitisation and decarbonisation. Our mid-market customers are showing healthy demand driven by manufacturing and social housing and our smaller business banking customer balances are stable with potential for growth once government schemes are fully repaid. Turning now to deposits. Customer deposits grew by £2.8 billion in the quarter. This was driven by commercial and institutional where deposits increased by £2.5 billion with broad-based growth across business banking, commercial market and our large corporates. Private banking and wealth management deposits were up 0.3 billion, mainly as a result of growth in savings balances. Retail banking deposits were stable with further migration to fixed and variable rate devices as customers prioritised tax-efficient savings options. Overall, deposit mix continues to be stable. Turning now to assets under management. Assets Under Management and Administration closed the quarter at £130.6 billion. This includes the addition of £71.7 billion from Even Partners and a £4 billion reduction in Assets Under Administration following the sale of Cushion in May. Excluding both Evelyn and Cushion, AUMAs were 6.2 billion higher in the quarter, comprising positive market performance of 5.1 billion and net inflows of 1.4 billion. Net inflows to assets under management of 1.1 billion were a record high at 10.2% of opening AUM on an annualised basis, demonstrating accelerating client confidence and strong momentum. Turning now to costs. We are pleased that once again we have driven operating leverage as income growth has outpaced cost growth. Other operating expenses were £2 billion in the second quarter, taking the total to £4.1 billion for the first half. Our persistent focus on simplification delivered a further £250 million of gross cost savings in the first half, which gives us the capacity to continue investing in the business. And we front-loaded investment spend in the first half to speed up our transformation. We also increased pay for staff by 4.1%, which took effect in April. The impact of this has been largely offset by a reduction in the number of employees. Our cost income ratio reduced by 2.8 percentage points to 46%. And we now expect other operating expenses of around £8.5 billion for the full year, including around £300 million for Evelyn Partners. We have given you a more detailed breakdown on the slide. Turning now to impairments. Credit performance remains strong and we benefit from a structurally low loan impairment rate and strong asset quality. The impairment charge for the quarter was £140 million, equivalent to 13 basis points of loans. We saw no new signs of stress across our three businesses and we continue to expect a loan impairment rate below 25 basis points for 2026. Thank you very much. Paul explained our capital allocation policy earlier, and our capital bridge here is aligned with that. As you know, our business is highly capital generative. We ended the first half with a common equity to tier one ratio of 14% before distributions, in line with the year end. 142 basis points was invested in our acquisition of Evelyn Partners. Our earnings power is reflected in 197 basis points of CET1 capital generation, which was boosted by 31 basis points of capital generation from RWA management. Our ongoing investment spend consumed 19 basis points and organic lending growth consumed 61 basis points. This means that in effect all our investment and growth was funded with just six months of capital generation. and we're reporting a CET1 ratio of 13.2% after accruing 50% of attributable profit for ordinary dividend payments. We expect to continue generating strong capital from earnings and RWA management. And for 2026, we now anticipate capital generation before distributions and the impact of EVLA partners of more than 240 basis points. This is also before the impact of Basel 3.1 on the 1st of January 2027, where we continue to assume around 10 million for RWA uplift. Turning now to guidance. Given our strong first half performance and the inclusion of even partners, we're strengthening our 2026 guidance. We now expect income, excluding notable items, of around £17.9 billion. Other operating expenses of around £8.5 billion, greater than 240 basis points, and a return on tangible equity of more than 19%. Finally, we now expect to announce our next buyback with our full year results in February. And with that, I'll hand back to the operator for Q&A. Thank you.

We will now take your questions. If you'd like to ask a question today, you may do so by using the raise hand function on the Zoom app. If you're dialing in by phone, you can press star nine to raise your hand and star six to unmute once prompted. We ask that questions are limited to two per person to allow an opportunity for more people to ask questions. We will take our first question from Shilsha of JP Morgan. Shilsha, please unmute.

Hi, Shilsha.

Hi guys, hopefully you can hear me.

Yeah, we got you.

Good morning. Good morning. I've got two, please. First, we've seen some changes to the leverage ratio come through, and your leverage ratio requirement has fallen, as have some peers as well. And you clearly have improved the mortgage stock market share, and this is a market that continues to grow. So I'd like to hear your thoughts on the changes to the leverage ratio and its application to the mortgage market. We had a peer yesterday talk about long-term asset margins declining in the mortgage market. So I'd be keen to get your thoughts there. and then secondly can I ask with regards to the private banking wealth inflows of 2 billion that you saw in the first half you made a point that 45,000 customers across the group have contributed to these inflows. I'm wondering When it comes to customer segmentation of your overall retail and corporate base, what is the target market we should be thinking of that may be applicable for products within the existing customer base? How are you doing in terms of penetration of

That's great, Sheila. Okay, Katie, why don't you talk a little bit about the leverage ratio, maybe then go on to talk about the mortgage market, and I'll cover what else.

Super, yeah, thanks very much. Thanks. Morning, Sheila. Look, the leverage framework announcements were very much as we had expected. We expect to see a kind of 42 basis point reduction in our leverage requirements. However, I think, Sheila, it's really important to note that we are not leverage constrained, so it doesn't really stay on balance sheet capacity. but instead ensures that leverage does remain a backstop measure for us. We're all kind of very much in line with expectations. Paul, do you want to?

Yeah, fine. I guess then the link to mortgages and assets. Look at the half one for ourselves on mortgages. As you say, we've grown slightly our mortgage market share, which is great. Thank you very much. Thank you very much. Thank you very much. for mortgage asset margins. I think the reality of some of the building societies is you may see on what I call vanilla mortgages, more competitive pricing, but I think it's very early to draw conclusions. On the second question, different topic, on private banking and wealth management, yet very, very pleasing kind of organic AOM flows in the private bank. Thank you very much. In terms of our customer segmentation and the opportunity and how we're going to execute across that opportunity, the spotlight I announced in the presentation will be a great opportunity to dig into that further. We're going to talk about the different customer segments, how the proposition plays, and how excited we are about the opportunities. But delighted with two things just to close off. The underlying momentum in the The wealth management business, the organic momentum, expertise and capabilities, which opens up much wider opportunities.

Thanks, Gilles. Our next question comes from Alvaro Serrano of Morgan Stanley. Alvaro, please unmute and go ahead.

Yes, I'm sort of struggling to unmute. Good morning, Paul and Katie. Kind of two questions on a similar theme around NII. It's sort of your growth in learning in CIB and corporate institutions is going to be very strong, if anything, accelerating. So can you sort of again sort of talk us through what you're seeing latest in demand? because it's accelerating more than sort of normalising. And looking at your pipeline conversations, should we continue to expect an acceleration? This kind of level of pace for the foreseeable future is sustainable in your view. Just a bit of colour on that as we think about the next few quarters and next year without explicit guidance, I presume, but some colour. and then on the deposits sort of competition again your competitor yesterday was making pretty sort of cautious sort of comments and assumptions around limited deposit growth in the system with strong loan growth that doesn't bode well for competition obviously in this quarter we saw the ISIS season but again any colour of how you're thinking about Your best guess of how the polycoms you may evolve in the next few quarters given the number of pictures. Thanks Alvaro.

I'll probably take both of them. So thanks for acknowledging the strong lending in CNI. We'll continue to be pleased with that. As you alluded to, it's not just one quarter, it's a strong track record. Thank you very much. I've touched on the areas it's coming through, you'll see in the disclosures, infrastructure, social housing, housing, aspects of tech, funds lending. There was also growth though in the mid-market and in business banking as well, so it's not exclusively the large end. Looking at the pipeline, there's a lot of demand, so there is a strong pipeline of borrow, so to that Thank you very much. Very encouraged there, and we think the strength of our franchise positions us very, very well. On the other side of the balance sheet deposits, so some growth in the quarter, just under 3 billion. You can see that's come through the private bank and also through the commercial franchise. Retail, give or take, is flat, although there are some ups and downs. Current account balance is up, for example. Thank you very much. Thank you very much. We take quite a holistic approach. We work very closely with the treasury teams and the strategy teams to do a great job to make sure that we're optimizing in terms of both the customer proposition, but also the cost of funding. And I think strategically what we've done over the last couple of years is really try and ensure that we're owning the customer relationship early. So whether that's startups, whether that's Innovation Economy, whether it's youth through rooster. And that means we build the primary relationship earlier and that comes with the high value deposits. So strategically, that's how we're thinking about it. So I think there will be net-net, the position I'd say in the retail hot money space. We're going to remain disciplined and we want to be thoughtful about where we invest and that needs to be where we can see wider customer value. Thanks, Alvaro.

Our next question comes from Benjamin Cameron Roberts of Goldman Sachs. Benjamin, please unmute and go ahead.

Hey, Ben.

Hey, Ben. Good morning. Thank you very much for the presentation and taking questions. Two for me, please. First, a lot of focus today on capital generation. And it's, of course, positive to see the share buyback expectations being pulled forward six months later. If we look further ahead, how are you thinking about uses of capital generated as we move into 2027 and 2028, particularly in terms of how much RWA growth is consistent with that strong lending activity you're seeing, and then how much capital that leads to be returned to shareholders? And then secondly, just on income, of course, strong as well this quarter. Could you talk through your expectations into the second half? and if you're seeing much of a different backdrop on income between the different segments of business and the balance of tailwinds versus headwinds in NAI and non-NAI. Thank you.

Thanks, Ben. Katie, why don't I take capital and you take income? Is that okay? So on capital, Ben, yeah, very strong capital generation in the first half, 137 basis points, obviously, Peter John-Paul Thwaite We still see growth opportunities across all three businesses. You can see the momentum we've got. We're executing well. We've now got a multi-year Cal record. We've got Cal targets out there, and we've demonstrated in the first half three businesses, but in a disciplined way. Thank you very much. So then that links to, I guess, the latter part of your first question, which is distributions committed to the 50% of attributable profit for ordinary. And then on surplus capital, we've got a very strong track record of returning our excess capital. We'll assess it, but we certainly see good value in buying back our shares regularly. where they currently are and we're absolutely committed to returning at the earliest opportunity and the signal we've given today that we expect to return at the year end is good evidence of that. I think all of that really is to me is I guess evidence of the model that we've built. We've got a highly capital generative model that gives us great choices to do and then drive the distributions for shareholders.

Katie. Thanks very much. Morning, Ben. So obviously we're pleased with the strategic progress we've made in the first half of the year and the strengthening of that guidance. That reflects in a large part of the Thank you very much. Thank you very much. The strong balance growth that we've had and pipeline that we can see in corporate lending, you know, that will come through and will continue to drive NII growth. We then have the reinvestment, obviously, in the structural hedge that will come through. Then if they look to the kind of non-interest income kind of area, you know that we're continuing to deliver a lot of product propositions for our customers. We're really pleased with the performance in C&I. at the beginning of the year. We expect that to continue. As we look at it, a solid performance. One thing I would think about is... Our next question comes from Guy Stebbings of BNP Paribas. Guy, please unmute and go ahead. Hey Guy.

Hi, morning. Thank you for taking the questions. First question was just on net interest income. Thanks for the refinements in the hedge guidance. Are you able to confirm what swap assumptions you're using to underpin that guidance this year, future years, etc.? That would be very helpful. And then on the lending spreads, they went backwards a little bit more than the pure mortgage back front book spread compression. I think that was just partly a function of good lending growth but maybe you could elaborate on the dynamics there and how we should think about that in future periods and then a question just on sort of buybacks and capital very pleasing to see that commitment come forward just interested is that purely a reflection of the better capital generation that you're seeing this year or does it reflect in any way in terms of comfort around where Basel III lands later this year thank you

Okay, thanks Guy. Why don't I take the third one very quickly and then you, Katie, you dive in. So the buyback is very much driven by the performance in the first half of the year, Guy. It doesn't make any assumptions in terms of year-round performance. Thank you very much. So if we deal with the hedge reinvestment rates, first of all, we've got 4%.

for the full year 2026, and that's 3.9% on the product hedge and 4.7% on the equity hedge. That's well ahead of the expectations we had at the start of the year, where at that time our assumption was that we would have two rate cuts coming down to a terminal rate of 3.25%. So clearly we're benefiting from that reinvestment rate. It's also supporting are out to best expect growth in our hedge income every year out to 2030. So there is further upside if the current market rates are sustained. If I then go on to NIMH, you're absolutely right. You can see within NIMH, while there's a two Thank you very much. This year already around the roll-off of the higher five-year fixed mortgages that's coming through. That will be completed as we get to the end of this year, so that's good to see a little bit more stability that will come through in later years on return. But of course, lower margin areas like mortgages, but also in our corporate and institution business. and so while we look forward the structural head continues to be a positive tailwind for the rest of the year but that those trends that we're seeing in the lending margins as we kind of add on higher returning business it will continue as we go forward from here so I would expect Thank you very much. Thanks very much.

Our next question comes from Benjamin Toms of RBC. Benjamin, please unmute and go ahead.

My question is firstly a clarification on that buyback and the quantum of buyback at year end. Is it the right way to think about it, the issue that you distribute down to 13% on a post-Basel basis? And then secondly, a question on buy-to-let, we're seeing a continued structural shift from amateur to professional landlords. Do you think you have the current capabilities to deal with that shift? Do you think you have the I want to comment on your parents. Right, okay. Katie Buck.

So I would like to be clear and deliberate when we set our target of around 30% so that we can be flexible with that number for our capital allocation decisions. We're not paying down to a specific number, but as we've said before, we wouldn't have a problem printing a 12 handle for CET1 given that this is a point in time metric. We're really confident in our strong ongoing capital generation as we've just demonstrated again these last six months. Obviously, you know, we haven't hit that 12 yet, despite the absorption of the Evelyn Partners acquisition at Q2, given how strong a capital generation has been.

Good. And then on the bright side, good observation in terms of, I guess, the amateur to professional landlords. That's the reason why we put the strategic partnership in place with Land Bay and that's working really well for us, a really successful partnership. Obviously the combination of them and ourselves, we have the necessary capability. We have also been building out in parallel our internal capability so we feel Very comfortable in terms of both from an underwriting perspective, from a face-to-market perspective. So yeah, that's why we took those steps last year, actually. So yeah, well placed on that front. So yeah, thank you.

Our next question comes from Pearlie Mong of Bank of America. Pearlie, please unmute and go.

Hi, Pearlie. Hello. Good morning. So two more questions. Just one on the hedge and the reinvestment rate. I think the footnote says it is macroeconomic assumptions, not for this year, but outer years. If I look at IMS, I think it's 3.8%. Can I just clarify that that is what you're assuming for outer year hedge roll-off assumption? And then second question on non-NI, can you help us understand a little bit more about the story of and many, many more. You know, the even advisory side of things, but the D2C side of things as well, because obviously some of your peers have been quite aggressive in pricing there and not charging any platform fees. So how do you make money and how do you monetize that D2C platform and how does that link to the non-NI growth?

Thanks for the good questions. Katie, do you want to go first and then I'll cover it up? I'll cover off wealth. Perfect.

Super, thanks very much. Sorry, apologies if I wasn't clear, forgive me. If I look at the rate that we're assuming For 2026, it's the product hedge reinvesting at 3.9% marked our out-of-year targets to market in terms of where they are. So that's still sticking with the kind of original assumption of the five-year swap rates of 3.5% through to 2028. So clearly, if this higher rate sustains as we go forward, you would see some additional benefit coming through from that as well.

Cole? Yeah, on DCC, early, so... You can see we've got, we've shared today, we've now got 45,000 people in the last quarter invested, in the first half we invested for the first time, so we're pleased with that. Obviously, as part of the Evelyn acquisition, we acquired a digital investing platform. We already have NatWest Invest as well. You can see the opportunities and how we plan to execute against those opportunities. The mindset we have around that is we see ourselves very much as the challenger, not the incumbent. Most of the markets we operate in, we are the incumbent. But the reality is in that space, we are the challenger. So we believe there are levers that we can pull given we have the customer relationships and we have the product set to be very competitive and very attractive. We've got the full end-to-end proposition in place now. I'm very excited about the opportunity and growth that can come from it. But more to come in the quarter four spotlight. Thanks, Billy.

Our next question comes from Andrew Coombs of City. Andrew, please unmute and go ahead. Morning.

Hey, Andrew.

You've got the majority of my answers, Scott. I'm just going to dig a bit further into C&I. On slide 34, you help to give the lending deposit margins by division. If I look at C&I, the lending margin is, or gross yield, I should say, is different, six to five and a half. So, interesting comments you have on the margin on the flow versus the stock, because obviously it's a strong growth there, but I assume it's in the lower margin segment. And secondly, staying on the same slide, deposit yield in C&I has actually trended up slightly in our quarter for basis points, and you can stay on deposit comp. Yeah, thanks Andrew.

Okay, I'll take them, Katie, if that's okay. So the CNI story is very much a mix. It's very much the mix story. We're deploying capital in areas which are low-risk rates, high-risk adjusted returns, infrastructure, social housing, etc. But obviously they're at lower margin. So We're very comfortable. That's a great deployment of capital. It's driving growth, but it's also driving returns. You should think of it as a deposit side. It's primarily a function of where the deposit growth has come from. There's very different ranges of pricing in the commercial and institutional base. Some of the growth this quarter has come from the large corporate institutional end. Obviously, the pricing on that is finer. These are the for example, aspects of SME operational balances. So it just reflects that. That's how I think about it.

Thanks, Andrew. Our next question comes from Rob Noble of Deutsche Bank. Rob, please unmute and go ahead. Morning. Thanks for taking my questions.

Just one question really. So loans are growing very quickly and the deposits not as quickly at the moment. So your loans deposit ratio has jumped to 92%, I think. So how far are you willing to let that go? And what are the marginal implications for just solely that aspect of loans growing faster than deposits going forward? Thanks.

Okay, so LDR and... Rob, can you just repeat the second one? We couldn't quite...

The margin implications from purely the loan-to-deposit ratio going up, does that cause margin lower given where the spreads are on both loans and deposits?

Yeah, no, absolutely. Let me talk to that, Rob. So as we look at it, we obviously manage our funding very holistically. We don't traditionally manage on an LDR basis within the bank. Clearly, it's something we look at, but it's not one of our key kind of metrics. So as we're kind of looking at things, we really manage on the LCR. We've still got capacity to move lower than the current 140 average LCR that we have. We've also seen us this year be a little bit more active in covered bonds. We've seen the growth of the assets on the balance sheet. We're very mindful of actually where is the right place to fund them from, whether that's to go to the market or whether that's to do a little bit more of deposits. Paul talked a lot about the importance of deposits for a customer relationship as well. So we kind of look to manage that. but clearly there is a little bit of an impact on that within the name as lending margins, as you can see, are a bit tight at the moment. We just need to manage all of those things, which is also why we're really focused on ROTI to make sure that we're getting the right returns for the capital that we're deploying and obviously balancing and fully loading in the cost of where that funding is coming from.

Thank you. Our next question comes from Chris Cantor, Autonomous. Chris, please go ahead and ask your question.

Hey, Chris. Good morning, can you hear me? Hey, Chris. Yeah, we got you. Thanks for taking the questions. Appreciate it. I wanted to ask on capital and data centres, please. So on the 13% and kind of flexing around that 13% target, I think the more interesting thing to come out of Bank of England The FPC review process was actually this flexibility they expect to introduce around the OSI buffer under stress. And effectively, if that happens, you're going to have one of the more hyperflexible MDAs in the sector. Just curious how that feeds into your thinking about headroom to MDA over time, particularly with your policy likely coming down next year. it seems to me that there's room to actually get to that target lower potentially over time. I understand you're not announcing your, one of your domestic peers indicated there may be room to review that in their case next year and they already run with a tighter headroom to MDA than you do. And then on data centers, There's obviously a relatively high number being built in the UK. As you say, you're the largest commercial bank. I'm just interested in whether you can comment on your exposure there, how you think about that area. And in particular, if you are taking exposures, how those get structured from a lending perspective, whether you have any sort of direct linkage into delivery of data centre revenues down the line. Thank you.

Okay, Katie, do you want to take the first one? Sure, absolutely, that's great. So I think, Chris, and good morning, and when we look at the target, I just sort of repeat again that we set our target very deliberately around 13%, so we're not paying down to a specific number in mind. We wouldn't have a problem paying down to kind of a 12 handle in terms of CT1. What I would say is that if you look at the risk-weight framework that's going on, and I know that you and Donald from our side are very involved in a lot of these overlaps between different parts of the framework, whether it's Pillar 2A or OSI or the CCYB kind of numbers, I think one of the things that you can see that's helpful is that the committee reaffirming its judgment that the appropriate benchmark for us as their T1 capitals. That's around that 13% of risk-weighted assets. Interesting that's equivalent to about a CT1 ratio of about 11%. So we may see some changes kind of come through from that. We've obviously got Basel 3.1 coming in, which we're confirming today that's still around 10 that we're estimating for that. As you can imagine, we don't kind of manage our capital today on what may or may not happen in terms of kind of future, which will be easier to access those offers. And I think we'll just very much watch to see how things develop. Again, we kind of welcome the move that they are more releasable in stress. But at the moment, there's no change in terms of what we're doing, what we're talking with you externally. Paul, can I come back to you?

Yeah, yeah, on that. Chris, on your... Your second question on data centres. We could probably spend a very long time talking about that. And I'm sure the team are also happy to pick up biolaterally. But maybe try some broader thoughts which should help you. It won't surprise you. Given the acceleration of data centre and the associated infrastructure build-out, we're very thoughtful in terms of where to deploy. Your point on how these things are structured, you very much think about whether it can be the physical security or it can be the long-term cash flows. We're very dependent on long-term cash flows. We're very focused on high-quality occupants. Thank you very much. There's a lot of talk and there's a lot of noise. I think it's key that you remain disciplined in this part of the market. That's our approach. Hopefully that gives you a sense of it. But the key really is if it's cash flows, then it's all about the creditworthiness of the occupant or the offtake, as it is in fact.

Our next question comes from Amit Gold of Mediabanker. Amit, please unmute and go ahead. Hopefully you can hear me.

I guess I'm just still trying to size how much buyback you could contemplate at year end and appreciate the comments that you'd be happy or you'd be comfortable running with a 12 handle. Still just trying to get a sense of pro forma for the 3.1 effect. Would you be happy running down to a 12.5% type buyback? And then my second question was just on the non-interest income in retail and just the comment about the There were some effects relating to the accelerated recognition of back book insurance income. Just kind of curious, how big was that? And then does that mean that we're not getting that income in the second half of the year? So just how much of a delta to expect going into Q3, Q4? Thank you so much.

Thank you very much. and our successful ongoing programme of RW management. We'll continue to exercise transactions where economics makes sense. We do have a good line of sight of those RW management actions for the rest of the year, following the £3.9 billion we did in the first half. Also, you should just bear in mind that we have got the annual risk uplift in Q4 as well. You can see historically what that number generally is. So if I bring all of those things together, I would think we're going through in the second half of the year on an RWA basis. And then if I go to the retail side, so what this was, was very much the recognition of a transaction we did with our existing and a home insurance provider as we move to a new provider. And so it's simply recognising the income that we've been flowing through over the next number of years into just now. The reality is, Amit, it was £45 million, so that will be a non-repeat in future quarters. But you won't see a particular impact on it on the different quarters because it will have to build up a little bit. You'll see that kind of coming back in. So for your model, I would kind of think of the £45 for this quarter and not worry too much about how it flows in and out over the next number of quarters. Hopefully that's helpful.

Thank you. Our next question comes from Nicholas Payne of Kepler Chevrolet. Nicholas, please unmute and go ahead.

Hi, Nick. Hi, morning. Thanks for the presentation. I have two questions, please. The first one would be on the retail banking and on the cost-income ratio. I can see a very strong improvement in the cost-income ratio. We are getting closer to the 40% market. I just wanted to know, what is the frontier, actually? Because I can see that, you know, you're talking about AI quite a lot. I think the AI usage has tripled. Cora... You also mentioned that your account, I think, decreased by 400x Evelyn Partners. So, yeah, anything structural going there, and if we could expect the cost-income ratio to actually go below the 40% mark. That's the first question. And the second question is coming back on your common KT regarding RWA management. I just wanted to know what your SRT benefit is currently included in your CT1 ratio. You mentioned he was part of your toolkit, so I just wanted to know whether or not he's going to accelerate or if we have hit a run rate on that front. Thank you.

Do you want to take that? Yes, absolutely. Sorry, forgive me. So if you look at where we are, this is year three of our SRT programme, so I would say at the moment that we're not quite at our run rate, but kind of at the end of this year you'd sort of see that while there would still be more actions, you'd be filling in kind of a lot of the historic deals. So we would expect to do more in the pillar three in terms of where we are, but we do think we still have a little bit more capacity building on the 3.9 full-to-RWA actions that we did earlier in the year. Paul, do you want to talk about that?

Yeah, on the cost-income ratio. So overall, Nick, great, great progress. You can see cost-income ratio has improved again. We're driving the cost-income ratio through all of the businesses, I would say. But the retail team have done a great job, as you alluded to, to get to the kind of circuit to do that. and they continue to drive productivity and efficiency. And when we laid out our group target of less than 45% for 2018, obviously we had some assumptions about what the different businesses would contribute. We've also said our ambitions go beyond 45% at a group level. And when we see the opportunities in front of us, some of them driven by AI, but not exclusively by AI. You may have heard me say before, I don't see AI as the Hail Mary here. We've still got a lot of good productivity and efficiency levers that we're pulling across the group that is improving the underlying efficiency of it. Thank you. Our final question comes from Ed Firth of KBW. Ed, please go ahead and ask your question. Hey, Eddie there.

Sorry, yes, Sam, can you hear me okay? Yeah, we've got you now, sorry. Morning, everybody. Yeah, I just had two quick questions. The first one was just picking up on a comment you made, I think, Katie, tell me if I'm wrong, that you thought the NIM trajectory would be flatter in the second half. I mean, given that it was up only four basis points in the first half, that... Sounds like we're getting pretty close to flat. First, I just wanted to check that that is my correct understanding. And I guess in that context, we've got another big year for the hedge next year. But after that, it grows, but grows quite modestly. And I'm just trying to think, is this pricing in the market, do you think? So as that starts to disappear, some of these competitive pressures will disappear? Because I think you said a lot of the pressure came from mixed. Now, that's not going to change. So once these hedge benefits go, which we said are 28, 29, are we actually saying the underlying margins will start declining? So I guess that's my first question. And the second one was... There's an awful lot of talk on this call and all the other calls about capital and the Bank of England potentially reducing capital requirements, etc, etc, pillar two covers, etc. You're making a 20% return. You're growing well above nominal GDP. What are we looking for? Actually, 20% is not enough. We should be making 25%. Thank you very much. Okay, can I take the first one?

Shall I start off on that? No, Ed, as ever, you're absolutely right. I did reference Flaster and him. My comment was directional. As you know, we don't guide on them. I think the important thing is that it really is around the deliberate choices that we've made to grow in low-risk but high-return areas. Thank you very much. and many, many more. Thank you very much.

Yeah, okay, thank you. And then, Ed, on the second question, I guess simply on the kind of capital reg side, for you to conclude, so everybody knows exactly where they stand, we're at the very tail end of ILB, the tail end of Basel III. I just think conclusion and certainty would be helpful for all stakeholders so our message is in a way no more complicated than that. In terms of then what we would do with any hypothetical additional capital We manage the business from returns. We'll deploy it where we see demand. At the moment, we can see that demand is there. And that growth obviously will support returns into the medium term. So I don't want to oversimplify it, but that's how we're thinking about the regs and that's how we're thinking about how we deploy capital organically. That's a virtuous cycle, as you know. We're deployed into growth, high returns, that drives capital generation, drives distributions. So it's no more complicated than that. But hopefully this gives you a little bit of core information.

Thanks, Ed. There are no more questions, so I'd now like to hand back to Paul for closing comments.

Okay, thanks, Matt. And thank you, everybody, for your questions. We appreciate it. I hope you've seen today in the presentation and hopefully in the Q&A the momentum we've got in terms of driving both sustainable growth and returns. We're very pleased with that. We've delivered growth across all three businesses, as we've touched on several times. and increased operating leverage. We're now the most efficient large UK bank. We have the lowest cost of risk and we're delivering the strongest capital. The mindset of management is that this is very much the start, not the end. We're very ambitious for the future of the business. So we're determined to capitalize on some of those leading positions that we've created and also our exposure to some of the structural drivers within the UK. and hopefully that will lead us to accelerate momentum you've already seen today. So our strategy is all about driving strong compounding growth and sustainable returns. So we look forward to updating you that both in the spotlight in quarter four and then in our quarter three results. So wish you a good Friday.

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