NatWest Group — the bank formerly known as RBS — on Friday announced a £750 million share buyback and said its first-half operating profit before tax rose 18.4% to £3.585 billion.

The bank declared an interim dividend of 9.5p per share, 58% higher than the prior year.

First-half total income rose 11.9% to £7.99 billion, with net interest income up 13.2% at £6.12 billion.

NatWest also raised its guidance for the full year and said it now expects income excluding notable items to be greater than £16 billion and said it expects to pay ordinary dividends “of around 50% of attributable profit from 2025 and will consider buybacks as appropriate.”

NatWest shares have risen about 50% in the past year to around £5.12 to lift the group’s stock market value to about £41 billion.

The group said: “We are pleased to have added 1.1 million new customers in the first half of 2025, both organically and through the Sainsbury’s Bank transaction which completed on 1 May 2025.

“In the first half of 2025 we delivered broad-based balance sheet growth, with net loans to customers excluding central items up by £11.6 billion, including £2.2 billion of balances acquired from Sainsbury’s Bank as we added scale to our unsecured business.

“Customer deposits excluding central items increased by £4.5 billion, including £2.4 billion of balances acquired from Sainsbury’s Bank.”

Customer deposits excluding central items at June 30 were £435.8 billion.

NatWest Group CEO Paul Thwaite said: “NatWest Group’s strong performance in the first half of the year reflects our consistent support for our customers and, in turn, delivery for our shareholders. We have today upgraded our income and returns guidance for 2025, as well as announcing a 9.5p interim dividend and a £750 million share buyback. The role we play as a trusted partner to over 20 million customers is fundamental to our strategy and we continue to focus on helping them achieve their ambitions, with lending, deposits and assets under management once again increasing in H1 2025.

“With positive momentum in our business, we are ambitious for the future and see clear opportunities for further disciplined growth. This is complemented by our focus 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. Having returned to full private ownership in Q2 2025, NatWest Group is well placed to step up and play its part in supporting economic growth across the UK and, in doing so, to create sustainable value for all our stakeholders.”

REACTION:

Richard Hunter, Head of Markets at interactive investor: “NatWest is the preferred play in the sector and these numbers vindicate that optimism.

“As far as investors are concerned, NatWest is in a sweet spot. 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, with NatWest already having made what it described as two significant purchases in the form of Metro Bank’s mortgage book and Sainsbury’s Bank and reportedly having been rebuffed in an approach for Santander’s UK operation. Its significant cash generation will provide an interesting dilemma on whether to continue to bolster shareholder returns, make further acquisitions, invest heavily in the business particularly in regard to growing digitalisation, or perhaps a combination of all of these options.

“At the headline level, pre-tax profit of £3.59 billion was 18.4% higher than the previous year, with the second quarter contribution of £1.77 billion higher than the £1.65 billion which had been expected. Total income rose by 11.9% to £7.99 billion, with Net Interest Income 13.2% higher at £6.12 billion and non-interest income ahead by 8.1% to £1.87 billion.

“Revenue generally was boosted by both higher trading and structural hedge income, as well as an £11.6 billion increase in lending activity which itself was accompanied by a £4.5 billion hike in deposits across the more traditional business. Indeed, the retail banking unit saw a 35% improvement in operating profit to £1.49 billion, driven by but not limited to the Sainsbury’s Bank acquisition and higher organic growth, where 1.1 million new customers were added in the second quarter.

“Higher income was also accompanied by operating costs which increased by just 1%, partly due to the increasingly positive effects of digitalisation across the business, leading to a reduction in the cost/income ratio from 55.5% to 48.8%, which is likely to prove a sector-beating number. Other key metrics also reflected strong progress, with a Return on Tangible Equity (ROTE) of 18.1% against 16.4% in the corresponding period, while a capital cushion or CET1 ratio of 13.6% comfortably in line with group estimates.

“The guidance was also raised, reflecting the group’s confidence in immediate prospects. Previously in a range of 15% to 16%, the ROTE estimate for the full year was lifted to 16.5%. while the total income projection of more than £16 billion compared to a previous outlook in the £15.2 billion to £15.7 billion range.

“To complete the interim triumph, NatWest also flexed its financial muscles in announcing a £750 million share buyback programme and a hike to the dividend which leads to a projected yield of 5%, both in stark contrast to the disappointment around the Lloyds numbers yesterday.  This largesse is likely to be well-received by investors who have seen the twin benefits of capital and income growth of late.

“There is very little of note for the bears to feed on from these results. An additional impairment charge of £193 million for the second quarter (£81 million of which is attributable to the Sainsbury’s Bank acquisition) led to a number of £382 million for the half year, which is as much a measure of prudence rather than any underlying credit deterioration.

“Instead, the positives are self-evident and an understandably warm reaction to the numbers adds to a share price gain of 49% over the last year, as compared to a hike of 11.6% for the wider FTSE100, and of 99% over the last two years. All things considered, the market consensus of the shares as a strong buy is highly likely to remain intact.”

Matt Britzman, senior equity analyst, Hargreaves Lansdown: “NatWest has given investors reason to cheer heading into the weekend with a broad-based beat this morning. It’s a similar story to Lloyds yesterday, with better impairments doing most of the work to bring profits in a good clip above expectations. Unlike Lloyds, NatWest has taken the opportunity to raise its guidance, though this simply aligns management to where consensus is already sitting.

“The overarching story here is a positive one. Borrowers are looking strong, loans and deposits are growing, and costs are under control. That’s providing a strong base for the bank’s secret weapon, the structural hedge, to sit on top of. The hedge is expected to bring home an additional £1 billion of income this year alone, as 0% products are being reinvested at yields of around 3.7%. This is a multi-year tailwind that’s helping underpin a positive outlook for NatWest.”