NatWest Group(US:NWG)2026-02-17 19:48Climate and Sustainability Goals - NatWest Group aims to achieve net zero across its financed emissions, assets under management, and operational value chain by 2050, in line with the UK's legal obligations [18]. - The company targets to halve the climate impact of its financing activity by 2030, using 2019 as a baseline [18]. - NatWest Group plans to provide £200 billion of transition and climate finance between July 1, 2025, and the end of 2030 [18]. - NatWest Group's climate and sustainability-related targets are based on current plans and are subject to significant uncertainties [19]. - The company faces significant uncertainties related to climate change, macroeconomic conditions, and regulatory changes, which may impact its strategic objectives [41]. - Data availability and accuracy issues limit the quality of climate and sustainability-related disclosures, affecting their reliability [27]. - The reliance on proxies or aggregated sector-level data may lead to inconsistencies in climate-related reporting due to varying methodologies [27]. - There is currently no globally accepted standard for classifying 'green' or 'sustainable' activities, which complicates reporting efforts [27]. - The risk factors related to climate and sustainability are detailed in the annual report, highlighting the uncertainties the company faces in these areas [21]. - NatWest Group enhanced its climate risk modeling capabilities in 2025, integrating climate risk into capital adequacy and risk management processes [207]. - Challenges in quantitative climate scenario analysis include the immaturity of modeling techniques and limitations in climate-related risk data [208]. - Significant uncertainty exists regarding climate evolution and responses from governments, businesses, and investors, impacting economic systems and asset valuations [208]. - Outputs of climate-related risk modeling are inherently more uncertain than those from traditional financial planning cycles based on historical data [208]. Financial Performance - Total income for 2025 was £16.6 billion, a 13.2% increase compared to 2024, with total income excluding notable items at £16.4 billion, exceeding guidance [45][46]. - Net interest margin (NIM) increased by 21 basis points to 2.34% in 2025, with expectations for total structural hedge income to rise by approximately £1.5 billion in 2026 [46]. - Customer deposits grew by £9.5 billion to £443.0 billion, with Retail Banking contributing £7.8 billion of this increase [47]. - Assets under management (AUMA) rose by £9.6 billion to £58.5 billion, driven by positive market movements of £5.0 billion and net flows of £3.1 billion [48]. - Total operating expenses increased by £113 million, with other operating expenses up by 3.1% due to higher transformation costs and inflationary pressures [49]. - A net impairment charge of £671 million was recorded, representing 16 basis points of gross customer loans, influenced by the acquisition of balances from Sainsbury's Bank [50]. - The CET1 ratio improved to 14.0%, an increase of approximately 40 basis points, supported by capital generation pre-distributions of 252 basis points [57]. - A final dividend of 23.0 pence per share is proposed, totaling 32.5 pence for the year, a 51% increase compared to 2024 [56]. - Risk-weighted assets (RWAs) increased by £10.1 billion to £193.3 billion, primarily due to franchise lending growth [54]. - The average Liquidity Coverage Ratio (LCR) was 147%, with £50.5 billion headroom above the 100% minimum requirement [55]. - Total income increased by 13.2% to £16,641 million compared to 2024, driven by deposit margin expansion and strong customer lending growth [66]. - Net interest income rose by £1,554 million, or 13.8%, benefiting from customer lending growth and deposit margin expansion [67]. - Other operating income increased by £50 million, reflecting higher Business Growth Fund gains and a dividend received on restructuring of a strategic investment [68]. - Net fees and commissions grew by £47 million to £2,514 million, largely due to higher AUMA investment fee income and transactional fees [69]. - Operating profit before tax was £7,708 million, an increase of 24.4% compared to 2024 [77]. - Profit from continuing operations reached £5,834 million, up 23.3% from the previous year [77]. - Total assets increased by £6.6 billion, or 1%, to £714.6 billion, primarily driven by growth in loans to customers [83]. - Total loans to customers rose by £18.6 billion to £418.9 billion, with significant growth in both Commercial & Institutional and Retail Banking [83]. - Total equity increased by £3.2 billion, or 8%, to £42.6 billion, driven by higher profit for the year [83]. - The effective tax rate rose to 24.3% from 23.7% in 2024, with a tax charge of £1,874 million for the year [72]. - NatWest Group reported a total income of £16.641 billion for 2025, an increase of £845 million or 15.0% compared to 2024 [91]. - The net interest income for 2025 was £12.829 billion, reflecting a £6.064 billion contribution from Retail Banking, which was a 15.9% increase from 2024 [91]. - Operating profit for Retail Banking reached £3.121 billion in 2025, up £690 million or 28.4% from the previous year [91]. - Customer deposits increased by £7.8 billion or 4.0% in 2025, totaling £443.0 billion, driven by growth in savings and current account balances [94]. - Net loans to customers rose by £7.7 billion or 3.7% in 2025, with mortgage balances increasing by £5.1 billion or 2.6% [94]. - The return on equity for Retail Banking improved to 24.7% in 2025, up from 19.9% in 2024 [91]. - The cost:income ratio for NatWest Group was 48.6% in 2025, a decrease from 53.4% in 2024, indicating improved efficiency [91]. - Impairment losses increased to £437 million in 2025, compared to £282 million in 2024, largely due to growth in unsecured lending [94]. - Risk-weighted assets (RWAs) increased by £3.0 billion or 4.6% in 2025, primarily due to movements in unsecured balances [94]. - NatWest Group supported 19 million customers in 2025, including 2.4 million youth customers, and achieved a Net Promoter Score (NPS) of 44 in its Premier segment [94]. - Private Banking & Wealth Management reported an operating profit of £394 million, with a return on equity of 21.7%, up from 14.2% in 2024 [100]. - Total income increased by £162 million, or 16.7%, primarily due to deposit margin expansion and higher transactional fees [103]. - Net loans to customers rose by £0.7 billion, or 3.8%, driven by higher personal and commercial lending balances [103]. - Assets under management (AUMA) increased by £9.6 billion, or 19.6%, with AUM net flows of £3.1 billion, representing 8.4% of opening balances [103]. - Commercial & Institutional achieved a total income of £8.8 billion, an increase of £852 million, or 10.7%, supported by lending growth and higher customer balances [104]. - The return on equity for Commercial & Institutional improved to 19.1%, up from 17.2% in 2024 [106]. - Customer deposits in Commercial & Institutional increased by £2.3 billion, or 1.2%, reflecting growth across various customer segments [110]. Risk Management - The company emphasizes the importance of forward-looking statements regarding its financial condition and strategic priorities, which are subject to inherent risks and uncertainties [11]. - Key risks affecting NatWest Group's future results include economic and political risks, changes in interest rates, and operational resilience risks [13]. - The implementation of NatWest Group's strategy carries execution risks, and the success of acquisitions or divestments is not guaranteed [43]. - The financial statements are prepared in accordance with UK-adopted International Accounting Standards and may include non-IFRS measures for better performance comparison [15]. - NatWest Group operates an enterprise-wide risk management framework (EWRMF) to ensure effective governance and decision-making across the organization [126]. - The framework aligns risk management with strategic priorities, focusing on customer understanding and resource management [127]. - Risk appetite defines the levels of tolerance for various risks, providing a structured approach to risk-taking within agreed boundaries [128]. - The Chief Risk Officer oversees risk management activities and advises the Board on the risk profile and control performance [129]. - The organization employs a three lines of defence model to articulate accountabilities and responsibilities for managing risk [144]. - The first line of defence includes customer-facing businesses and support functions, responsible for managing direct risks [145]. - The second line of defence, comprising the Risk function, provides oversight and ensures compliance with the risk management framework [147]. - The third line of defence, the Internal Audit function, offers independent assurance on the effectiveness of the risk management framework [150]. - Risk appetite statements are established for all principal risks, detailing the extent and type of activities that can be undertaken [156]. - The Board reviews and updates risk appetite statements annually to align with business and financial planning processes [159]. - NatWest Group's risk appetite is reviewed annually by the Board, ensuring alignment with strategy [160]. - The risk management framework includes regular assessments of the overall risk profile, incorporating market developments and trends [163]. - Stress testing is a key component of capital management, used to evaluate the impact of changes in risk factors on financial strength [174]. - The Internal Capital Adequacy Assessment Process (ICAAP) is conducted annually to evaluate the amount and distribution of capital required to cover material risks [180]. - NatWest Group maintains a liquidity risk management framework, including daily reviews of liquidity and funding risks at significant legal entity levels [185]. - Non-traded market risk exposures are reported quarterly to the PRA, detailing interest rate exposure and other characteristics [194]. - The recovery plan outlines how NatWest Group would respond to financial stress events, ensuring critical services are maintained [189]. - Regular independent testing of controls ensures they function as intended, providing real-time insights into control effectiveness [168]. - The risk and control performance assessment (RCPA) is used for annual self-assessment across business areas, evaluating the strength of the control environment [169]. - Reverse stress testing identifies scenarios that could render NatWest Group's business model unviable, enhancing risk management strategies [177]. - NatWest Group conducts macroeconomic stress tests periodically as part of its bank-wide capital planning process, with a planning horizon of five years [204]. - The cross-risk capital planning process is conducted at least once a year, combining market risk stress test results with other risks for presentation to the Board [205]. - Vulnerability-based stress testing analyzes portfolios for key vulnerabilities, reporting results to senior management without subjecting them to limits [206].