NatWest has reported a surge in first-quarter profits, topping £2 billion, as the banking group benefits from sustained higher interest rates despite a deteriorating outlook for the UK economy.
Strong Financial Performance
The lender, which also owns Royal Bank of Scotland and Coutts, posted an operating pre-tax profit of £2 billion for the three months to March 2026. This represents a 12% increase compared with the £1.8 billion recorded in the same period last year.
Growth was driven by an expansion of its lending book and a rise in customer deposits. Additionally, the bank achieved over £100 million in extra cost savings during the quarter.
Interest Rate Tailwind
Like other high street banks, NatWest expects to be buoyed by interest rates remaining elevated for an extended period, which enhances its ability to generate income from loans. Consequently, the group now anticipates full-year income at the upper end of its guided range of £17.2 billion to £17.6 billion.
Cautious Outlook on UK Economy
However, NatWest has increased its provisions for potential loan losses after revising its UK economic forecasts. The bank acknowledged that rising energy prices, driven by conflict in the Middle East, have weakened the economic outlook.
Credit impairment charges more than doubled to £283 million in the latest quarter, up from £136 million a year earlier. Nonetheless, this figure remains significantly lower than the £823 million set aside by Barclays.
Economic Projections
NatWest now expects UK economic growth to slow, inflation to climb to around 3.5%, and the unemployment rate to peak above 5.7%, while interest rates remain at current levels for longer.
CEO Commentary
Paul Thwaite, NatWest’s chief executive, commented: “We have started the year with positive momentum, underpinned by healthy customer activity – growing all of our three businesses, expanding our capabilities to meet more of our customers’ needs and further improving productivity as we use AI at scale across the bank.”
