NatWest Boosts Forecast After Q3 Profit Jumps 30%
The British banking giant surpassed analyst estimates and raised its full-year guidance on income and profitability, citing strong lending activity in a high interest rate environment.
NatWest Group PLC (NYSE: NWG) delivered a robust third-quarter performance, reporting a 30% year-on-year surge in pre-tax operating profit that significantly outpaced analyst expectations. The British lender subsequently raised its full-year guidance for the second time, signaling confidence in its ability to navigate the complex economic landscape and capitalize on higher interest rates.
The bank posted a pre-tax operating profit of £2.18 billion for the third quarter of 2025, comfortably beating the £1.83 billion average forecast compiled from analyst estimates. The strong result pushed the company's shares toward their 52-week high, reflecting investor approval of the firm's sustained momentum.
Following the strong quarter, NatWest upgraded its full-year 2025 financial targets. The bank now expects total income to reach approximately £16.3 billion, an increase from its previous forecast of over £16.0 billion. In a key measure of profitability, it also lifted its guidance for Return on Tangible Equity (RoTE) to over 18.0%, up from the prior target of above 16.5%, according to its official results announcement.
The results underscore how UK banks have benefited from the Bank of England's monetary policy. While the central bank has recently paused its rate-hiking cycle, holding its key rate at 4%, the elevated interest rate environment has allowed lenders like NatWest to expand their net interest margins—the difference between what they earn on loans and pay out on deposits.
"These results demonstrate the strength of our strategy and the resilience of our balance sheet," the company stated in its earnings release. The bank's total income for the quarter rose by £0.2 billion to £4.2 billion, driven by growth in both net interest income and non-interest income streams.
The performance provides a favorable backdrop for the UK government's ongoing efforts to sell down its remaining stake in the bank, a legacy of the 2008 financial crisis bailout. A consistently profitable and stable NatWest is more attractive to institutional investors, potentially accelerating the government's path to full privatization.
Analysts reacted positively to the report, with many noting the bank's strong capital position and potential for shareholder returns. The bank’s Common Equity Tier 1 (CET1) ratio, a key indicator of financial strength, remains robust, providing a solid foundation to absorb potential economic shocks.
However, challenges remain on the horizon. UK inflation, while down from its peak, was still 3.8% in September, nearly double the Bank of England's 2% target. This persistent inflation, combined with a slowing economy, raises concerns about a potential increase in loan defaults and credit impairments in the coming quarters. NatWest, like its peers, will have to carefully manage credit risk as households and businesses contend with higher borrowing costs.
Despite these macroeconomic headwinds, the bank's upgraded forecast suggests its management believes its lending portfolio is well-positioned to withstand the pressure. The strong earnings and improved outlook have solidified NatWest's standing in the UK banking sector, with its shares trading near their 52-week high of $15.52, a testament to the market's confidence in its strategic direction.