NatWest Margin Expansion Persists as Loan Growth Accelerates 45%
NatWest Group's net interest margin widened to 2.48% in H1 2026 even as net loans jumped £17.0bn, more than 45% faster than the prior year's pace.
NatWest Group (NWG) widened its group net interest margin by 20 basis points year-over-year to 2.48% in the first half of 2026, from 2.28% in the first half of 2025, following a 21-basis-point expansion the year before that. The continuation of that trend, rather than a plateau, underpinned net interest income of £6,890 million, up 12.6% from £6,120 million a year earlier.
The margin gain came alongside accelerating balance-sheet growth. Net loans to customers, excluding central items, rose £17.0 billion to £406.2 billion in the half, more than 45% faster than the £11.6 billion of growth reported in the same period a year earlier. Customer deposits, also excluding central items, grew £5.9 billion to £447.6 billion, a modest acceleration from the £4.5 billion added in the first half of 2025. The UK-focused lender, built around Retail Banking, Commercial & Institutional, and Private Banking & Wealth Management, saw the margin tailwind play out unevenly across those segments: Retail Banking NIM rose 11 basis points year-over-year to 2.69%, a smaller gain than the 32-basis-point expansion booked the prior year, while Private Banking & Wealth Management NIM rose 20 basis points to 2.77%, also down from a 39-basis-point gain a year earlier. Both segments remain in expansion, but the pace of that expansion is moderating.
Private Banking & Wealth Management also delivered a record £2.0 billion of net asset inflows in the half, equivalent to 9.2% of opening balances annualised, up from £1.5 billion (8.1% annualised) a year earlier — a gain achieved before assets under management were further inflated by the £71.7 billion Evelyn Partners acquisition.
That acquisition weighed on capital. The CET1 ratio fell to 13.2% at the half-year mark, down 110 basis points from 14.3% at the first quarter and down 40 basis points from 13.6% a year earlier, with roughly 140 basis points of the half-on-half decline attributable to Evelyn Partners. Management still targets a CET1 ratio of approximately 13.0%, leaving limited room before the bank approaches the lower end of its range. NatWest raised its interim dividend to 12.0p per share from 9.5p, a 26% increase, while pulling forward guidance on capital returns: the next share buyback will now be announced alongside full-year 2026 results, six months earlier than previously planned.
Credit quality held steady. The loan impairment rate was flat year-over-year at 19 basis points, even as impairment losses rose 10.7% to £423 million from £382 million, reflecting the larger loan book rather than any deterioration in underlying risk. The ECL coverage ratio declined to 0.80% from 0.87% a year earlier, with the total provision broadly stable at roughly £3.6 billion versus £3.7 billion, consistent with an improving credit outlook rather than reserve depletion.
Efficiency gains continued to compound. The cost:income ratio, excluding litigation and conduct costs, improved 2.8 percentage points year-over-year to 46.0% from 48.8%, extending a run that saw the ratio improve 6.7 percentage points the year before that, driven by roughly £250 million of gross cost reductions. Return on tangible equity rose to 19.7% from 18.1%, itself an improvement on the 16.4% recorded two years earlier.
The combined effect — widening margins, faster loan growth, and a lower cost base — pushed returns higher even as capital absorbed the cost of the Evelyn Partners deal. With buyback timing now pulled forward and CET1 sitting close to target, the balance between funding growth and returning capital is set to tighten through the back half of the year.