NatWest Group plc Q4 FY2025 earnings call

Disciplined growth: Added 1 million new customers, lending grew 5.6% to GBP 393 billion, deposits up 2.4% to GBP 442 billion, AUM&A up 20% to GBP 58.5 billion, income grew 12% to GBP 16.4 billion. Bank-wide simplification: Made GBP 600 million gross cost savings, created GBP 100 million investment capacity, decommissioned 200 business applications, rehosted core banking platform. Managing capital and risk: Generated 252 basis points of capital, CET1 ratio 14%, loan impairment rate 16 basis points, total distributions GBP 4.1 billion

Retail Banking: Customer base increased by over 5%, customer assets and liabilities grew 4% to GBP 421 billion, cost/income ratio reduced from 50% to 45%. Mortgages: Increased flow share of first-time buyers from 10% to 12% and of buy-to-let market from 3% to 6%, extended reach via NatWest Boxed. Private Banking and Wealth Management: Over 50,000 new customers, net new flows to AUM grew 41%, AUM&A increased 20% to GBP 58.5 billion, cost/income ratio reduced 10 percentage points to 64%. Commercial & Institutional: Extended FX expertise to 700 mid-market customers, lending balance grew 10% to GBP 14 billion, reached GBP 7.5 billion social housing ambition ahead of schedule and set new GBP 10 billion ambition, delivered GBP 19 billion climate and transition finance towards 2030 target

2026 income, excluding notable items, expected to be within GBP 17.2 billion to GBP 17.6 billion. Loan impairment rate expected below 25 basis points. Capital generation before distributions around 200 basis points. Return on tangible equity greater than 17%. Acquisition of Evelyn Partners to bring GBP 69 billion AUMA, increase fee income by almost 20% on Day 1, aim for return on invested capital above share buyback by year 3

Q: On costs, where did GBP 600 million cost saves come from and thoughts on 2026 cost saves and cost growth.

A: Cost saves from tech investment, digitization, automation, decommissioning applications, simplifying business. 2026 cost expects to be around GBP 8.2 billion with continued cost tight management.

Q: On greater than 4% customer assets and liabilities target, disaggregate across divisions.

A: Confident in growing across all aspects of CAL, lending, deposits, AUM, with different areas growing at different rates but overall expecting to meet the target.

Q: On profitability and hedge.

A: RoTE expected to continue strong with CAL growth. Hedge duration stable, deposit stability considered, hedge income expected to continue with reinvestment of swaps into gilts.

Q: On Evelyn acquisition, other potential acquisitions, AI risks in wealth and banking.

A: Evelyn was right fit for scale and capabilities. AI in wealth will be accelerant with scale and data, hybrid of AI-driven digital and human expertise.

Q: On broader capital generation targets and CET1 target.

A: 2026 cap generation excludes Basel 3.1 effect, CET1 target around 13%. 2028 capital generation target greater than 200 basis points.

Q: On RWAs and rates assumptions.

A: RWA volume follows lending growth, hedge reinvestment rates assumed 3.5% for product hedge and 4.5% for 10-year gilt.

Q: On revenue guidance and AI in software engineering.

A: 2026 revenue guidance in range due to customer activity, rate cuts, RWA actions. AI in software engineering with 12,000 engineers, 35% code written by AI, expecting productivity and efficiency gains.

Q: On Evelyn integration, revenue synergies, attrition risk.

A: High confidence in integration, revenue synergies from BestInvest, Premier customers, regulatory tailwinds. Attrition risk managed through offering value.

Q: On tangible equity and hedge maturity yields.

A: Tangible equity guided by loan growth. Hedge redemption yield in 2028 slightly below 4%, expected to fall later.

Q: On income guide and rate sensitivity.

A: 2026 income guide considering customer activity, rate cuts, RWA actions. Rate sensitivity around 60% pass-through.

Q: On cost of capital actions and AI impact on cost.

A: GBP 100 million additional cost from capital actions. AI expected to drive cost efficiencies and lower unit cost over assets