NatWest shares have climbed in morning trading after the lender revealed a substantial increase in third-quarter profits following its efficiency drive.
The FTSE 100 banking group’s operating profit before tax jumped more than 30 per cent in the third quarter to £2.2bn, compared with £1.7bn in the previous year, as reported by City AM.
Stock prices rose over five per cent at market opening to 567.26p.
The lender’s net interest margin (NIM) – a key metric indicating profitability from lending activities – expanded to 2.37 per cent, representing a nine basis point increase from the second quarter.
Within retail banking, the firm achieved an operating profit of £850m, bolstered by £1.7bn in mortgage lending growth.
Overall group income rose £200m during the quarter to £4.2bn, marking a 10.4 per cent increase year-on-year.
The bank has revised upward its full-year income forecast to £16.3bn, representing an increase from the £16bn target set at half-year results and approximately £15.7bn previously.
The banking group emphasised its efficiency initiatives, stating it had made “good progress on becoming a simpler bank, delivering efficiencies”.
This contributed to a five per cent enhancement in its year-to-date cost-to-income ratio, which declined to 47.8 per cent.
During the nine months ending September 30, 2025, interim dividend payments to shareholders totalled £768m.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, described the latest results as “another reminder that UK-focused banks are quietly performing better than many give them credit for.”
He added: ” NatWest delivered a strong set of results, comfortably beating expectations with profits about 10 per cent ahead of consensus.
“The good news was broad-based: revenues were higher, costs were lower, and even loan impairments came in better than feared.”
Though he did note the upgrade was “a touch cautious”.
Tax uncertainty hovers over NatWest
The figures emerge just one month before the Labour government’s second Autumn Budget, where banks are widely anticipated to face a potential tax assault.
Research from Benjamin Toms, equity analyst at RBC, indicated NatWest and Lloyds would be most exposed to even modest changes in the tax rate.
British banks face a sector-specific levy imposed alongside corporation tax as well as VAT, property taxes, national insurance and other business levies.
The levy currently stands at three per cent but earlier this year former Deputy Prime Minister Angela Rayner advocated for the rate to rise to five per cent to generate additional revenue for the public coffers.
The proposal has received support from think tanks and been classified as “highly likely” by certain economists.
NatWest, which secured a pre-tax profit of £6.2bn in 2024, would forfeit nearly £140m to a surcharge aligned with Rayner’s proposals.
Nevertheless, some lobby groups have urged the Chancellor to pursue more aggressive measures, with the left-leaning Institute for Public Policy and Research (IPPR) advocating for an £8bn assault on the sector. By the close of August, NatWest Group shares had shed over five per cent in a single day’s trading amid rumours that the Treasury was planning a tax assault on the sector.
The losses signified a £2.5bn decrease in the bank’s market capitalisation.
