Natwest shares jump after cost-cutting boosts profit
Natwest stock surged in early trading this morning after the lender posted a major bump in third-quarter profit following its cost-cutting regime.
The FTSE 100 giant’s operating profit before tax surged over 30 per cent in the third quarter to £2.2bn, up from £1.7bn last year.
Shares were up over five per cent as markets opened to 567.26p.
The bank’s net interest margin (NIM) – a crucial measure to indicate the firm’s profitability from lending – swellled to 2.37 per cent, up nine basis points from the second quarter.
In retail banking the firm delivered an operating profit of £850m, which was driven by £1.7bn lending growth in mortgages.
Total income for the group jumped £200m in the quarter to £4.2bn, 10.4 per cent up from the year prior.
The bank upgraded its income target for the full year to £16.3bn. This marked a jump from £16bn at half-year results and around £15.7bn prior.
The banking giant highlighted its cost-cutting, where the lender said it made “good progress on becoming a simpler bank, delivering efficiencies”.
This resulted in a five per cent improvement to its year-to-date cost to income ratio which fell to 47.8 per cent.
For the nine months to September 30, 2025 the interim dividend paid to shareholders was £768m.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said the fresh results were “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 ass the upgrade was “a touch cautious”.
Tax cloud lingers over Natwest
The results come just a month ahead of the Labour government’s second Autumn Budget, where banks are highly-speculated to be the subject of a tax raid.
Analysis from Benjamin Toms, equity analyst at RBC, suggested Natwest and Lloyds would be most vulnerable to even marginal adjustments in the tax rate.
UK banks are subject to a sector-specific levy that sits on top of corporation tax as well as VAT, property taxes, national insurance and other taxes levied on businesses.
The levy currently sits at three per cent but earlier this year ex-Deputy Prime Minister Angela Rayner called for the rate to be increased to five per cent to strum up some cash for the public purse.
The move has been backed by think tanks and ranked as “highly likely” by some economists.
Natwest chief Paul Thwaite sounded alarm on a bank tax raid following the lender’s results on Friday.
Thwaite said: “Strong economies need strong banks and I really want to use the capital of the bank to support our customers”.
He added: “The Government should be thoughtful about signals it sends to investors who are looking at the UK as a long term home for capital.”
Natwest, which pocketed a pre-tax profit of £6.2bn in 2024, would lose near-£140m to a surcharge in line with Rayner’s calls.
However, some lobby groups have called for the Chancellor to go further with the left-leaning Institute for Public Policy and Research (IPPR) calling for an £8bn raid on the sector.
At the end of August, Natwest shares lost over five per cent in a day’s trading as speculation mounted that the Treasury would launch a tax raid on the sector. The losses marked a £2.5bn reduction in the bank’s market value.