Royal Bank of Scotland parent NatWest getting back to basics as first-half profits jump 18%
“The government shackles have gone, the group has prodigious amounts of cash and acquisitions to boost growth further seem likely” – Richard Hunter, Interactive Investor
NatWest’s strategy of getting back to basics and trimming costs is paying off, analysts have said, after the banking giant posted a double-digit hike in profits.
The lender, formerly known as Royal Bank of Scotland Group, reported a pre-tax operating profit of £3.6 billion for the first six months of the year. That was 18 per cent higher than the same period a year earlier, and ahead of the £3.5bn or so that the City had been anticipating.
NatWest, which recently returned to full private ownership for the first time since its financial crisis bailout in 2008, revealed that total income was up by about 12 per cent year-on-year, with its retail banking division boosted by higher customer deposits. It also reported higher levels of lending to customers over the period, driven by higher mortgage balances.
Mortgage lending picked up significantly for many UK lenders ahead of stamp duty relief becoming less generous at the start of April, with many first-time buyers hoping to secure home purchases before the deadline.
NatWest revealed it gained 1.1 million new customers in the first half of 2025, primarily from acquiring Sainsbury’s Bank in May and taking on its customers.
Chief executive Paul Thwaite said the group was focused on “bank-wide simplification, as we quietly revolutionise how we operate, enhancing our tech and AI capabilities in order to better meet and anticipate the evolving needs of our customers”.
Efforts to simplify the bank helped bring down business costs over the latest period.
Zoe Gillespie, wealth manager at RBC Brewin Dolphin, said: “NatWest has posted another strong set of results, beating forecasts again as the bank’s turnaround really takes hold. Its strategy of simplification, cost reduction and technology integration - combined with sensible bolt-on acquisitions - is driving income growth and greater profitability.
“The addition of Sainsbury’s Bank, in particular, provides a real platform for further growth in UK retail banking. Now fully in private ownership, NatWest has a freer hand to make its next big strategic move and, in the interim, shareholders are being well rewarded for their patience with a sizeable dividend increase and share buyback programme.”
NatWest announced that it was kicking off a new share buyback programme of £750 million in the second half of the year, in a bid to return cash to shareholders.
Richard Hunter, head of Markets at investment platform Interactive Investor, described NatWest as the “preferred play” in the banking sector.
“As far as investors are concerned, NatWest is in a sweet spot,” he noted. “The government shackles have gone, the group has prodigious amounts of cash and acquisitions to boost growth further seem likely.
“It would be a false comparison to reflect on the previously heady share price levels of almost £64 in 2007, when a bloated and overstretched Royal Bank of Scotland very nearly met its end. This NatWest is an entirely different and more focused beast and the scope for progress is increasingly apparent. Indeed, it remains to be seen whether this new-found freedom will enable a more aggressive acquisition policy.”
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