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.