NWG

Morning, welcome to NatWest Group's Q1 2026 results management presentation. Today's presentation will be hosted by CEO Paul Thwaite and CFO Katie Murray. After the presentation, we will take questions.

Good morning, thank you for joining us today. As usual, I'm here with Katie. I'll start with a brief introduction before Katie takes you through the numbers, and we'll then open it up for questions. We started the year with strong momentum across our three businesses and made good progress against each of our three strategic priorities. First, we continue to pursue disciplined growth. In retail banking, we increased our share of the mortgage market as we expand our offering and announced new partnerships, such as becoming the exclusive mortgage provider for Rightmove. In private banking and wealth management, our acquisition of Evelyn Partners makes a strong addition to the group. The transaction is progressing well, and we expect it to complete in the second quarter, subject to the usual regulatory approval.

In commercial and institutional, we are the leading bank for U.K. startups, and we grew our share this quarter as we onboarded 24,000 new startups, a 25% uplift on the same period last year, supported by easier agentic onboarding. Second, we are leveraging our investments in simplification and have delivered over GBP 100 million of additional cost savings in the first quarter. We employ over 12,000 software engineers, and we are complementing that talent with artificial intelligence. Over 40% of our code is now written by AI, and we are scaling agentic software development. Typically, our development process for new customer propositions requires 12 engineers and takes six weeks. In some scenarios with a team of three engineers and seven agents, we can deliver in just six hours, making us more productive and delivering faster for our customers.

Third, we continue to manage our balance sheet actively, helping to free up capacity for further growth and allocate capital dynamically in this fast-changing environment. Let's turn now to the financial headlines. Customer lending grew 6.6% year-on-year to GBP 400 billion, whilst customer deposits grew 2.6% to GBP 445 billion. Lending growth of GBP 7.3 billion in the first quarter was well balanced across our businesses, including GBP 3.3 billion in mortgages and GBP 3.8 billion in commercial and institutional. We also provided over GBP 10 billion of climate and transition finance, taking the total to GBP 29 billion since last July, making good progress towards our GBP 200 billion 2030 target.

Deposits increased by GBP 3.1 billion in the first quarter, with growth in corporate and institutional partly offset by an expected decrease in retail and private banking as customers use their savings to make annual tax payments. Assets under management and administration grew 16.9% year-on-year to GBP 57 billion. 23,000 people invested with us for the first time during the quarter, with net inflows to assets under management of GBP 900 million. Taken together, client assets and liabilities have increased to just over GBP 900 billion, up 5.2% year-on-year, in line with our 2028 annual growth rate target of more than 4%.

Income grew 6.9% to GBP 4.2 billion, and costs were up 4.8% to GBP 2 billion as we increased our operating leverage and reduced our cost income ratio by 2.1 percentage points to 46.5%. Our return on tangible equity was 18.2%, driving strong capital generation of 65 basis points in the first quarter. Earnings per share grew 15.5% year-on-year to GBP 0.179. Tangible net asset value per share was up 15.1% to GBP 4, and we continue to maintain a strong balance sheet with a CET1 ratio of 14.3%. Since we announced our full year results in February, conflict in the Middle East has clearly increased geopolitical uncertainty.

While sentiment is now more considered, we have yet to see any material impact on our customers. Both households and corporates remain resilient with historically high levels of savings and low levels of debt and arrears. In light of this uncertainty, we have revised our economic scenarios and now expect higher inflation with interest rates remaining at 3.75% for the rest of the year, resulting in slower economic growth and a modest increase in unemployment. This means we have taken an additional provision in the first quarter of GBP 140 million, which reflects our macroeconomic assumptions, not our credit performance, which remains strong. With rates staying higher for longer, we now expect full year income to be at the top end of the GBP 17.2 billion-GBP 17.6 billion range we set out in February.

We remain confident about the outlook and our 2026 guidance. That confidence is underpinned by the knowledge that we have built a resilient business which is well-positioned for a broad range of macroenvironments. We have a clear strategic focus on growth that delivers good returns with a prime lending portfolio that's well diversified and largely secured. We have invested and simplified so that we are now the most efficient large U.K. bank with a cost income ratio that continues to improve, and we are actively managing our balance sheet. For example, we have taken the opportunity of a sharp move upwards in the yield curve to accelerate the increase in our structural hedge, supporting income growth in the years ahead. We have also increased our capital efficiency significantly in recent years, driving high levels of capital generation.

All these factors have contributed to our strong performance in the Bank of England stress tests, giving us confidence in our outlook and guidance, not just this year, but over the medium term. With that, I'll hand over to Katie to take you through the numbers in more detail.

Thank you, Paul. My comments for the first quarter use the fourth quarter as a comparator. Income, excluding notable items, reduced 1.1% to GBP 4.2 billion, and total operating costs were 9.2% lower at GBP 2 billion, delivering 11.6% growth in operating profit before impairment to GBP 2.3 billion. The impairment charge was GBP 283 million, equivalent to 26 basis points of loans, including the charge for our updated economic scenarios that Paul mentioned. This resulted in operating profit of GBP 2 billion, with profits attributable to ordinary shareholders of GBP 1.4 billion and return on tangible equity was 18.2%. Turning now to income. Income, excluding notable items, was GBP 4.2 billion.

Excluding the impact of two fewer days in the quarter, income across the three businesses continued to grow, supported by both volumes and margin. Net interest margin was 247 basis points, up 2 basis points due to deposit margin expansion and a small benefit from funding and other, with lending margin declining by 2 basis points, mainly driven by mortgages. As you heard from Paul, our 2026 guidance now assumes that the Bank of England base rate remains at 3.75% this year, rather than coming down to 3.25%. Together with our revised economic scenarios, this means we now expect income, excluding notable items, to be at the top end of our GBP 17.2 billion-GBP 17.6 billion range, excluding the impact of Evelyn Partners. Turning now to customer assets and liabilities or CAL.

You will recall we introduced our 2028 growth target for CAL in February. I am pleased we are entering another new year with strong growth continuing our track record. Our CAL increased by GBP 8.4 billion or 0.9% in the quarter to GBP 900 billion. This includes lending growth of GBP 7.3 billion, deposit growth of GBP 3.1 billion, and a reduction in assets under management and administration of GBP 1.8 billion as strong AUM inflows were offset by market movements. I'll touch on each of these elements in turn. We're reporting another quarter of strong broad-based loan growth across the group, with growth loans to customers up by GBP 7.3 billion. Retail banking and private banking and wealth management balances grew GBP 3.5 billion or 1.5%.

This comprises GBP 3.3 billion in mortgage lending and GBP 200 million in unsecured lending. Mortgage stock share increased marginally to 12.6%, and we have a robust pipeline following record applications in March. Commercial and institutional lending increased by GBP 3.8 billion or 2.4%. This includes growth in corporate and institutions driven by good demand across a broad range of sectors, including project finance, renewables and utilities, and funds lending, together with increased lending in commercial mid-market, notably in commercial real estate and the housing sector. You will also see we have provided a detailed breakdown of our financial institution exposures, including private credit in the appendix of our presentation. Turning now to deposits. Customer deposits increased by GBP 3.1 billion despite the expected higher seasonal tax outflows. Commercial and institutional deposits increased by GBP 5.1 billion.

This was partly offset by a slight decline in retail banking and private banking and wealth management deposits as a result of higher customer tax payments of GBP 10.3 billion. Retail banking outflows were partly offset by growth in current account and ISA balances. Overall, our deposit mix remained broadly stable. Turning now to assets under management. Assets under management and administration closed the quarter at GBP 56.7 billion. We are pleased with positive AUM net inflows of GBP 0.9 billion, which equates to 8.2% of opening AUM, demonstrating continued client confidence and strong momentum. There was a reduction in assets under administration of GBP 1.4 billion, driven by gilt redemptions to support client tax payments. Overall, balances were impacted by negative market movements of GBP 1.7 billion. These were reversed during April. Turning now to costs.

Other operating expenses were GBP 2 billion, an increase of 4.8% year-on-year and a decrease of 8.3% compared with the fourth quarter. Our cost income ratio in the quarter was 46.5%. We are pleased with the progress we've made on our transformation, and we made decisions to accelerate investment spend and incur higher restructuring costs in the first quarter, which drove the overall cost growth year-on-year. The reduction from the fourth quarter is mainly due to ongoing cost savings as well as lower bank levies. We remain confident in the delivery of our full year 2026 cost guidance of around GBP 8.2 billion, though our cost profile will be uneven throughout the year. Turning now to our updated macroeconomic assumptions. Following a period of global macro uncertainty, we have revised our economic assumptions.

In our revised base case, we assumed inflation now means CPI will peak at 3.5% in 2026 rather than fall to 2% by the end of the year. This means interest rates stay higher for longer, and we assume the bank rate remains at 3.75% throughout the year. We expect lower GDP growth of 0.4% and a modest increase in unemployment to a peak of 5.7%, above our previous assumptions of 5.4%. This remains at levels we are comfortable with in terms of lending risk appetite and credit quality. We will continue to review our assumptions as the situation progresses. Our balance sheet remains well-provisioned with an expected credit loss of GBP 3.7 billion and ECL coverage ratio of 84 basis points.

Our latest scenarios also show that even if we were to give a 100% weight to our new moderate downside scenario, this would increase stage 1 and 2 ECL by GBP 99 million or 2 basis points. Turning now to the impairment charge. The impairment charge for the quarter was GBP 283 million, equivalent to 26 basis points of loans. This includes a charge of GBP 140 million as a result of changes in economic scenarios and total post-model adjustment releases of GBP 34 million, as elements were effectively consumed by changes in our economic scenarios. Excluding these, our underlying impairment charge was 16 basis points. There were no new signs of stress across our three businesses, and the current credit performance of our book remains strong.

We continue to expect a loan impairment rate below 25 basis points for 2026, so our guidance is unchanged. Turning now to capital. We ended the quarter with a Common Equity Tier 1 ratio of 14.3%, up 30 basis points since the end of the year. Capital generation before distributions was strong at 65 basis points. This includes 69 basis points from earnings. Other regulatory capital movements added 16 basis points. Growth in risk-weighted assets consumed 21 basis points of capital, and our usual accrual for ordinary dividend payments reduced capital by a further 37 basis points. Risk-weighted assets increased by GBP 2.7 billion. GBP 4.3 billion of business movements broadly reflects our lending growth and increased market risk.

This was partly offset by a reduction of GBP 2.2 billion as a result of actively managing our RWAs to create capacity for further growth. Other movements included FX and immaterial CRD4 model updates. We remain confident in our ability to continue generating strong capital from earnings and to manage risk-weighted assets and expect around 200 basis points of capital generation before distributions this year, whilst operating at a CET1 ratio of around 13%. Turning now to guidance. We now expect income, excluding notable items, to be at the top end of our range of GBP 17.2 billion-GBP 17.6 billion, excluding the impact of the Evelyn Partners acquisition. All our other guidance and targets remain unchanged. With that, I'll hand back to the operator for Q&A. Thank you.

We'll now take your questions. If you'd like to ask a question today, you can do so by using the Raise Hand function on the Zoom app. If you are dialing by phone, you can press star nine to raise your hand and star six to unmute once prompted. We ask that questions are limited to two people, sorry, two per person, to allow an opportunity for more people to ask questions. We'll take our first questions from Andrew Coombs of Citi. Andrew, if you'd like to unmute and ask your question.

Morning. Thank you for taking my questions. If I could just have one on loan and deposit growth and then I guess the second on Average Interest-Earning Assets. On the loan and deposit growth, again, it's a strong performance Q on Q, again, led by C&I. If I speak to any investor, particularly those outside the U.K., they always struggle to link the economic performance in the U.K. with the strong loan growth and loan demand you're seeing. Perhaps you can just touch upon, you know, what drove the loan and deposit growth, particularly in C&I. Where is that demand coming from? How sustainable do you think it is throughout the remainder of the year and into next year?

The second question, I mentioned that loans are up Q on Q, deposits up Q on Q, but your Average Interest-Earning Assets are down 0.2% Q on Q, and it seems to be due to a reduction in the liquid asset buffer. Perhaps you could just touch upon that as well and what's driving the disconnect between the Average Interest-Earning Assets and the movement in the loan balances. Thank you.

Thanks, Andy. Okay, Katie, why don't I take lending and deposits and then you come back on AIEA.

Perfect.

Okay. Good, good stuff. Andy, as you say, good strong growth on both sides of the balance sheet. Pleased on lending and deposits, especially as you know that the context for Q1 deposits is always higher outflows because of tax payments. Why don't I give an overview, and then I'll drop down into C&I 'cause I'm conscious you wanted some specific color there. Lending overall, I'd say it's pretty broad-based. You can see growth in mortgages, you can see growth in C&I, you can see growth in unsecured within retail as well. Within C&I, you can see it through different business lines. I'd also add that the pipelines remains pretty strong as well in both businesses, so we're encouraged by that.

Not only is the activity good, the pipeline, you know, I was going through it yesterday and Wednesday actually, the pipeline of activity looks strong looking ahead into quarter two and quarter three. As you know, we've consistently grown above market growth on the lending side. I'll come back to some of the reasons why I think that that's true. On deposits, two sides to this. As I say, we've got the tax outflows in retail and private banking. They were up 28% year-on-year, so it's a big number. You know, GBP 10 billion of deposits. That was offset by growth in C&I, which was from a combination of things. Some of that was operational deposits, some of that was interest-bearing deposits.

I think when you think about the size of our corporate and commercial franchise, the reality is we benefit, you know, as deposits flow onto corporate balance sheets. If you look into retail, actually personal current accounts were up, which is good. That's obviously healthy from a number of factors. We are starting to see the impact of our, what we call our boxed proposition, where we're providing savings products to companies like AA, Saga, Sainsbury's, et cetera. That's also supporting retail deposits. That hopefully gives you a kind of big picture view. On C&I specifically, demand has been strong. I think we're very well-positioned on what I'd call some of the structural drivers, so project finance, infrastructure, transition finance, utilities, funds lending, energy transition, et cetera.

I think what you can see is the growth in those parts of the market is bigger than, let's call it, the U.K. systems growth. I think that helps to explain why our C&I franchise captures the opportunities there, but also outperforms the market. As I said, the pipelines are strong. To your point on sustainability, I think those trends are they're structural trends, not kind of short-term opportunistic trends. I think the lending growth and the lending pipelines will continue to support sustainable growth. Net net, good balance sheet performance. C&I, yes, but also on the retail side of the business as well. Hopefully that gives you a bit of color. Katie?

Sure. Thanks very much. Hi, hi Andy. You're absolutely right. When you look at AIEA, they were sort of stable in the quarter. They were down kind of 0.2%. A couple of things within there. A reduction reflects the optimization of our surplus liquidity. We repaid around GBP 4 billion of TFSME at the end of Q4, and we deployed surplus ability to meet our customer loan demands, which we've just been talking about in a quarter of seasonally lower deposit growth. If you look at the kind of the Q1 loan growth of GBP 7.3 billion versus the GBP 3.1 billion of deposit growth, there's a natural kind of mismatch within there.

What I would say is, you know, we're 3% higher than AIEA's a year ago, we do expect them to grow from here going forward as our customer lending increases.

Great.

Thanks, Andy.

Very clear. Thanks, Katie. Thanks, Andy.

Our next question comes from Alvaro Serrano. Sorry, Alvaro Serrano of Morgan Stanley. Alvaro, please go ahead.

Yeah, well.

Hope you can hear me okay. Good morning.

Morning. We can hear you clearly.

I actually had two questions related to spreads. The first one is on mortgages. At least I had the expectation of a step down in spread on mortgages in Q1, given the roll-off of the COVID ones. Actually the spread has held up reasonably well versus my expectations at least. I think the contribution is 324. Can you maybe? This one's for Katie, but can you maybe talk to if there's still sort of headwinds ahead and talk to the mortgage front book spreads? Then similarly on commercial, the spreads there, when I compare it to base rates, have been increasing steadily the last eight quarters or so.

As you grow the book, what kind of business are you underwriting there and, what do you think should it continue to improve or, how do you see the outlook on pricing on corporates and, as well commercial? Thank you.

Okay, great, Alvaro. Good. Do you want to start with mortgages?

Yeah.

Yeah.

Great. Absolutely. No, thanks very much. morning Alvaro.

Yeah.

At Q1, we continue to write mortgages at front book spreads that were below the back book, as we did through last year, which we talked about a lot, very much in line with our strategy of delivering steady growth at attractive returns. Our, I'd say our year-to-date margins are in line with expectations. We did see a bit of volatility in March. We repriced every two days, so that's 11 kind of changes in 20 to 22 days, which I think is a great testament to the flexibility we've built into the system.

We can even see that ability to handle that increased mortgage demand as a result of that investment in the platform and digitization, which has meant we've been able to execute new business at margins which are ahead of the back book in April, which is great to see. You're absolutely right to mention the COVID mortgages. We are seeing a little bit of the book margins being impacted by that churn of the five-year COVID era mortgages, and they're rolling off at spreads that are higher than we're currently writing. I would expect that to have worked its way through during the rest of this year. We expect a little bit of pressure from this on the book margin for the coming quarters.

I guess as I go to where we are today. You know, where we're writing the mortgages in front book spreads which are below the back book, what we're seeing is it's starting to bring that back book margin down. We're kind of writing now, you've heard me talk a lot about this kind of below 70 basis points over the last number of quarters. That's kind of continued, and as I look at that number, I think that we will see the book margin to reprice to around 60 basis points over the course of this year. Interestingly, April margins have been above the back book, and we're pleased we were able to capture that.

I talked to you, remember, at the year end of around 1 to 2 basis points impact on our NIM walk per quarter throughout this year. You actually saw that already in our walk this quarter. You should expect to see that. I'd also really encourage you is don't forget to see that you have the deposit margin expansion that's gonna more than offset that negative. Hopefully, overall, that gives you what you need. Paul, are you gonna do the commercial spreads?

Yeah.

Shall I?

Happy to.

Okay, perfect.

Thanks, Katie, and thanks, Alvaro. On commercial spreads, couple of general points first. I would say of our actually commercial lending margins, I would see them as fairly stable on a product-by-product basis. That's how I'd think about it. There's obviously always a mix effect depending on where you write the business, but there's been no material deltas, changes, you know, over the recent past or nor would we expect it going forward. That's, I guess, one positioning piece. Secondly, in our commercial book, a significant proportion of customers are paying variable rates, so you will see that. You will see kind of rates reprice in line with short-term rates and how that changes.

Hopefully those two points just contextualize what you'll be looking at in terms of the commercial lending book. If you drop down into the individual businesses or asset classes within the commercial institutional bank, there's different dynamics. Obviously at the very small end, margins are much higher, but the total value of lending there is small relative to the overall commercial book. Whilst we're growing that business, and it's higher margin business, from a weighted average perspective the impacts are relatively limited. In the commercial mid-market, that's a competitive space, but across the field, but depending upon the asset class, the margins can vary quite a lot, so if it's social housing, lower margins but very high risk-adjusted returns. Commercial real estate, thinner margins, more of a commoditized product.

At the large corporate side, obviously you've got the kind of revolver aspect to that, but also where you've got kind of project financing and infrastructure finance, a bit of the same dynamics as my example on social housing. At a spread level, you know, margins are relatively tight, but given the capital treatments, risk-adjusted returns are very attractive. What they're all very good areas to deploy capital at good returns at. Nothing major to call out, I'd say, on commercial spreads, but that hopefully gives you a bit of the contours of how that business works. Thanks, Alvaro.

Next question today comes from Benjamin Toms of RBC. Benjamin, please go ahead and ask your question.

Hey, Ben.

Hey, Ben.

Morning. Thank you guys for taking my question. The first one's on your income guidance for you, which you've upgraded to the top end of your previously provided range. Just wanted to kind of get some color, your thoughts on whether you'd characterize this guidance as being conservative. I'm just noting that consensus is kind of still quite a way above that guidance and whether you're comfortable with that gap. Secondly, there's been some pretty fairly intense competition in the ISA, cash ISA deposit market. NatWest Group are competing, but one of your large peers is not. Can you just talk a little bit about how you weigh up collecting deposit volumes versus margin at group level at the moment? Thank you very much.

Great. Thanks, Ben. I'll take the guidance and income, Katie. Then you can talk a little bit around retail savings and ISAs. Yeah, as you said, Ben, we've strengthened the income guidance. We're guiding to the top end of the range of the GBP 17.2-GBP 17.6. We're doing that for a couple of reasons. One, you can see the momentum in quarter one. The underlying performance has been good, which is great. Then you've got the kind of net effect of the change in economics. Obviously, we've changed our rate assumptions. You've seen that from two cuts, assumed two cuts now to zero. We've also assumed, you have to follow the logic through.

You know, you would assume if you have, if you don't have rate reductions, it would be reasonable to expect some small softening in demand, so we've assumed that. Net-net, we see that as positive to income, so that's kind of how we're positioning at the top end. We haven't changed the guidance for RoTE. We're maintaining the greater than 17% there, but we're increasingly confident on that. As I said in February and I'll say again, it's always a greater, that's always been a greater than guidance, and we always aim to beat our targets. We haven't changed that, but we're increasingly confident 'cause obviously the conditions for that are supportive. I should point out, you know, it, I think it's obvious, but that all excludes Evelyn. Net-net, Ben, I would say it's a good start.

We're confident around 2026, hence the nudge up in guidance. We haven't changed 2028, but obviously you can see from the trends that it's the conditions are supportive towards the medium term as well. Katie?

Lovely. Thanks very much and hi, Ben. I guess if I look at our ISAs and the kind of recent activity, I think the first thing I would really say is we see really strong relationship value in our fixed term deposits. We have high retention rates, you know, greater than 80%, and some of those are retained in the higher margin instant access products, as well as us also having an opportunity in the future to engage with these customers on investment products, and we've seen good growth there as well this quarter with a lot of new investors coming in. We'll also expect that ambition to kind of grow, and it's that's supported by the acquisition of Evelyn Partners, obviously, in this last quarter.

During Q1, with the volatility that we saw in the swap markets, we actively managed our hedging across both our assets and liabilities, which enabled us to really price effectively on the fixed-rate deposits. Overall, you can see our deposit mix has been stable, both at the group level and in retail. When I look at fixed-rate ISA specifically, the balances are small in the context of the group, low single-digit percentages of deposits. In terms of overall deposit dynamics and margins, really very happy with the progress, particularly around things like current account growth, and we expect to see ongoing group deposit margin expansion in the coming quarters. Overall, a real comment on balance across the portfolio. Thanks.

That's good, Ben.

Thanks, Ben.

Yeah.

Thank you.

I'd add one small thing on that, actually, Ben, because I've got the pricing tables in front of me. It's quite interesting when you look through, you know, as Katie said, we've been very thoughtful about, you know, how we manage the volatility and swap rates and how we play that back into pricing to maintain margins. You can see you've got three or four of the larger banks ahead of us on pricing. As Katie alluded to, the volumes have been encouraging. I think we've been very thoughtful in how we're playing that market. Thanks.

Thanks.

Next question comes from Guy Stebbings of BNP Paribas. Please go ahead, Guy.

Hey, Guy.

Hey, Guy.

Hi. Morning there. Thanks for the question. I think I just have one sort of broad question on the income guidance for this year and the assumptions sort of underpinning it. It's clear in terms of what you're doing on policy rate, but in terms of the long run of the curve, when we're thinking about the hedge reinvestment, could you confirm what the assumption is there? In terms of volumes, I'm just trying to work out whether you're assuming slightly more sort of conservative macroeconomic assumptions as per the ECL models, but that would be going against the positive comments you're saying in terms of what you're actually seeing on lending volumes, et cetera. Clarify what sort of expectations are on volumes.

On, on mortgage spreads, just, in light of the comment you made there, I'm just trying to understand whether anything's changed. You've talked about the stock of the back book trending down towards 60. I presume that's kind of entirely consistent with what you were expecting, you know, a few months back. Actually your comment on April being above the back book is slightly encouraging. Could you just confirm if those mortgage spread trends are sort of in line better or worse than what you were thinking a month or two ago? Thanks.

Great. Thanks, Guy. Very clear. Katie, have you got any preference on order?

I'll.

We've got hedge, volume.

I'll start off with spreads and hedge, and then why don't you come back in on volume?

Yeah, volume. Yeah.

Yeah, perfect. Thanks so much. If I look at the hedge, first of all, a few things just to kind of share with you on that. First of all, when we talked about the hedge at the year-end, we said that we would increase our structural hedge this year above GBP 200 billion and as we've seen, as deposit balances have grown and equity base will increase given the business growth. What we did earlier in Q1 was, as we saw those yield curves move really sharply higher in the quarter, we did take a decision to accelerate the increase of our product hedge, so we added about GBP 5 billion additional in Q1. That means that we've locked in income for the outer years and, of course, modestly reduced our rate sensitivity as a result of that.

When I look at the kind of first three months of the year overall, we're reinvesting our product hedge at about 3.8%. That's against guidance I'd given you at the year-end of 3.5%. I would now expect that reinvestment rate on average for the whole year, given what we've seen also in April, to be around 3.9% on the product hedge and 4.7% on the equity hedge, which is up from 4.5% as we go through there. As I look at those kind of current assumptions of rates, the growth that we've seen, I do continue to expect total hedge income will grow annually through to 2030 as you see the improved levels that we spoke about in February.

If I look to your mortgage spreads, you've got it completely right. Mortgage margins very much in line with our expectations. They are currently a little bit better. I would encourage you not to bank that forever, but we're very happy with how the team are managing the book at the moment. We can see the reduction in book margins absolutely being driven by refinancing. If you think a little bit of our mix, 30% of the book will reprice this year, and the roll-off is a little over 90 basis points on a blended basis. That really drives the stock margin lower over the course of the year, completely in line with our expectations and very much in line with the income guidance that we've given you throughout this year and upgrading this morning.

Thanks. On volumes, Guy, so this, as you say, this kind of, this trying to thread the needle a little bit between, I guess, the logic of the kind of mechanistic logic of the economic assumptions versus activity year to date and pipelines, and I think that's what we're trying to balance. If you take the logic of the economic assumptions through, i.e., higher for longer, slight tick up in unemployment and slower growth, then the logic of that would be you would see some softening in, for example, the mortgage market. These are our original predictions and likewise some softening in business lending. That's what the economic assumptions drive.

When you look at the activity, you know, as you rightly point out, what we've said is quarter one has been very strong on the lending side. The pipelines in the respective businesses look strong, so the activity is there. I guess what we're trying to do is strike the right balance between optimism on that side, but also, I guess, the reality of how the economics play out over the course of the next nine months might impact demand, and we've factored that into how we've guided toward the changed guidance to the top end of the range. Hopefully that just unpacks a little bit how we're thinking about it. Cheers, Guy.

Next question comes from, Jonathan Pierce of Jefferies. Jonathan, if you'd like to unmute and ask your question.

Hey, Jonathan.

Hello. You all right?

Yeah.

Good. I've got two questions, please. The first, the other C&I non-interest income, it's been running at about GBP 230 million-GBP 240 million a quarter for the last six quarters. Dropped down to GBP 170 million in the first quarter. It does feel like there was a bit of a one-off in there. I don't know if you can quantify how big that was and whether you've seen anything else coming through since the end of March. Secondly, more broadly on this impairment sensitivity, I just trying to get a feel as to how much confidence you have. I've asked you this before, Katie, actually, in the IFRS 9 ECL models.

I mean, you're telling us today that the weighted average assumption for GDP growth is about 0.3%, 0.4% a year next couple of years. The downside is -0.4% this year and -1.6% next year. It's also got unemployment going up to 6.2% next year, I think. You're telling us your ECL in that scenario would only increase by about GBP 99 million. You know, I get that that's a general provision measure, but by definition, the ECL on those stage 1 and 2 is reflective of losses you expect in the future on the performing book. Are you genuinely confident?

If so, why, more qualitatively, in this idea that even if we saw a recession, even if we saw unemployment moving into the 6s, your impairment charge, X any initial ECL build, would not move up very significantly at all? Thanks a lot.

Good. Thanks, Jonathan. Right, I'll take the first one, Katie.

Perfect. Sure.

You can take the second one. Jonathan, your characterization is right. Obviously pretty stable income line last six quarters. Dropped off at the C&I, non-interest income dropped off in quarter 1 2026. If you look at that compared to 2025, I think GBP 20 million versus GBP 64 million. Not exclusively, but almost exclusively, it's explained by sterling rates, as you say. Kind of one-off, you've seen that across lots of desks and lots of banks. We have a relatively small rates business. It's obviously indexed to sterling given what we are as NatWest. That really explains the delta that you're seeing there. You'll see GBP 64 million in quarter one 2025 and GBP 20 million in quarter one 2026.

That's a big part of the difference versus the previous quarters. Couple of things I'd say, it's obviously very small in the context of the overall revenue line, and also given the more subdued volatility, we'd expect improvements as we go through quarter two onwards, not just in that line, but overall on C&I non-interest income. I think you're seeing it and reading it pretty accurately there. Okay, Katie.

Sure. On impairments, thank Jonathan, and good morning. Because as I look at it, these are models that we test extensively. They go through both our own verification and independent verification, and they're also reviewed very closely by external parties. I am comfortable in them, and I think that the thing that I do like with IFRS 9 is this concept, which is around the PMA. That enables me where there are moments of discomfort. You can see that we sometimes have them when you can see in different classifications it's wider than just the economic uncertainty.

When you see other numbers in there, you can go, actually, that's a bit of the model they're kind of working on. Completely comfortable on the models is what I would say first. You're right, if I look to the ECL on kind of stage 1 and 2, if I went 100% kind of to the downside, it suggests an extra GBP 99 million. I would remind you that's stage 1 and stage 2, there would be some stage 3 losses. They are impossible for us to quantify as to what they would be, we don't seek to attempt that. I would probably suggest to you that the actual charge could be a bit higher if that was the case.

Obviously, that's not our base case just now, in terms of where, of what we're looking at. We, you know, at this stage, we are happy with the base case. We're happy with the guidance that we've done. We've obviously added a bit on the MES, 110 net, a little bit out of PMA. That's just kind of mechanics of the calculation, which has taken us to the 26 basis point charge this quarter. You know, but if I take out that MES we've overlaid, it's kind of 16 basis points. What we can see, it's a good, well-diversified, well-performing book to date.

We've given you a good estimate if we were to move. At the moment, obviously, we're comfortable and happy to have that little bit of extra buffer as we enter a little bit of greater uncertainty than we've seen recently. Comfortable at this stage, Jonathan. Thank you.

Thanks, Katie.

Next question comes from Benjamin Caven-Roberts of Goldman Sachs. Benjamin, if you'd like to unmute and go ahead.

Hey, Ben.

Hey, Ben.

Thanks very much for the presentation and for taking the questions. Just two for me, please. First, a follow-up on the cost of risk. I see you mentioned about 60% of mortgage balances, and now with customer rates above 4%. How are you thinking about the refinancing profile for that remaining portion, and the extent to which those customers are moving on to rates a fair bit higher than what they'd expected when entering those mortgages? I know you do stress rate assumptions as well when issuing the mortgage originally, but clearly a lot of volatility in swaps and rate expectations right now. Just keen to your thoughts on that. Secondly, thanks a lot for the extra disclosure on the financial institutions.

If we look at that business and private credit altogether, how are you thinking about the growth of that book? Is it something you expect to grow more quickly or more slowly relative to the recent past? Have you changed your strategy at all in terms of the underwriting there? Thank you.

Great. Thank you, Ben. Katie, you go.

Yeah, sure.

You take the first question.

Yeah. On terms, of course, reference. Hi, Ben. You're absolutely right. You've obviously, you've got far in the pack this morning, slide 32 kind of lays it out really nicely. I guess a couple of things I would talk about as we look at our prime mortgage books, obviously the level of security gives us a lot of comfort. Our sort of greater than three month arrears are below the sector average and quite significantly so. It's very, it's well underwritten. I guess the guide on the financing of the remaining 40% that aren't on customer rates over 4%, we do kind of use what's happened in the last couple of years to kind of help guide us on that.

What you've seen in that time, obviously there has been wage growth across the different areas. People who are coming up are very aware that they're coming up. They are. What we see has been really interesting over the last couple of months is our kind of a greater increase on the use of the two year versus the one year. You know, if you look at our versus the five year, forgive me. If we look at our kind of five year fixed as a percentage of our fixed book, it's about 66% five year. Actually if I look just at what's even been happening in the last little while, that's kind of flipped almost completely so that we're writing about 77% two year at the moment. Customers, they understand what they're doing.

They are understanding what they need to do in terms of managing their exposure. We do see them looking to lock in refinancing early so that they can get the benefit of the rate, they've certainly been preparing for this. As we talk to them as they go through that, those transition, obviously it's a big change when you go from your COVID rate to the new rate, but it's something people have definitely been looking for, and we've seen them managing it really, really quite well, I would say. Paul.

Yeah. Yeah, fine.

Private credit.

Ben, so yeah, I'm glad you liked and have seen the new disclosure. We hope that's ever helpful to everybody. In terms of the kind of outlook for the, obviously it's a very broad business, when you look at the breakdown there. In terms of the areas that you referenced, we have been growing the business, I guess over a number of years, but it's been in a very disciplined way. If you look at limits there, they haven't really moved since this time last year, so quarter to 2025. Likewise, we haven't materially changed our risk appetite. We're always very focused on being senior lender, good protection from first loss, making sure that the risk adjusted returns are supported.

Our strategy really has been not around growing limits, but prioritizing risk adjusted returns versus volume driven growth. As you know, we haven't been involved in any of the recent public names. Looking forward, what I would expect actually is to see some of the spreads to widen, so i.e. the same business, the same risk, but actually better risk adjusted returns. That would be my assumption, 'cause as you know, a lot of that business is relatively short term in nature, so you get to reprice. That's how we're seeing. Hopefully that gives you a sense of it in terms of limits, but also I guess business strategy, which is returns led rather than volume led. Thanks.

Helpful. Thank you.

Thanks, Ben.

Our next question comes from Chris Cant of Autonomous. Chris, if you'd like to unmute and ask your question.

Are you there, Chris?

Good morning. Thanks for taking my questions. Two please. On corporate banking, commercial banking, in the context of what we've got going on in the Middle East, are there any areas of your book that you'd be more nervous on, please? I'm not thinking specifically just about oil price as an input here. I guess there is the potential for product shortages or oil related product shortages, regardless of price, if this persists. Are there any sectors that you're nervous on, when you're speaking to your corporate customers, what are they worried about?

On the comment around refi of the mortgage book, my understanding there is that customers essentially have sort of a bit of a free option to lock in, but then change product if rates shift after they've preemptively locked in. Are there any risks to you and to kind of NII later in the year given swap volatility? I'm just conscious, I guess, the value of that option being given to customers is arguably higher right now. Any comments on how you manage that, how we should think about that would be appreciated. Thank you.

Thanks, Chris. I'll take the first. Katie, you take the second.

Perfect.

On the, I guess the kind of core mid-market commercial bank, Chris, obviously we're staying very close to all the various sectors and also the different regions there. It's very consciously a very diversified book. You know, we give you quite a lot of breakdowns on the relative sectors and segments. In terms of it, to your specifics around sectors or sub-sectors that might see greater impacts, probably similar to some of the previous kind of challenges, I would say sectors like agriculture, aspects of hospitality and leisure.

Where you see some of the, you know, the not just what you call pure energy input prices, but, you know, fuel, fertilizer, food, et cetera, where you see exposure there would be areas that we will pay more attention to. As we've done in the past, work closely with those sectors if support packages are needed. We're not at that stage yet, and we're seeing no deterioration. I think generally what I'd say, if you think back through what we're seeing in the Middle East, what we saw through the tariff period, a similar time last year through Ukraine and even through the pandemic, customers are, I'd say business customers are a lot more adaptable and resilient than maybe they were prior to the pandemic.

Their ability to change their cost base and/or pass on costs, the kind of the way in which they've engineered their business models over time have given them more flexibility. What we see is both faster response, but also greater adaptability, which, you know, ironically, I think it is down to the fact that a lot of these businesses and sectors have had to face a lot over the course of the last four or five years. That's how we see it. They're probably two sectors that are kind of on our minds. Katie.

Sure. Thanks very much. You know, great question, Chris. We've kind of watched this happen historically, we've seen other peaks. Look, it's something that we manage incredibly tightly on this. We've got very sophisticated modeling that we have in play. We base on it looking very much at the kind of individual kind of customer behavior, looking at what happened in other periods of interest rate volatility, you know, who would move, who would kind of stick. You heard me mention earlier today as well that, you know, what we've done and the investment that we've done within our mortgage system has allowed us to kind of be able to react really, really quickly. You know, I mentioned that we reprice 11 times over the course of 22 days during March.

I mean, that is a significant change from where we were a number of years ago. Very comfortable with the dynamic overall. What I would kind of add is that we do see that most people who do refinance with us do ultimately kind of stick with us as well. There's that good kind of customer engagement, which is just is really, really critical. We're also kind of largely locked in already for our forthcoming roll-offs. What I would say, all of these things, you know, are embedded in the guidance that I've talked about today about the book actively kind of repricing to 60 basis points over the course of the year.

While we manage it actively, I don't see it being something that would change what I've said to you this morning already on that, on that number.

Perfect.

Thanks very much, Chris.

Thanks, Katie.

Next question comes from Sheel Shah of JPMorgan. Sheel, if you'd like to unmute and ask your question.

Hi, Sheel.

Hey, Sheel.

Hi. Hi, guys. First question on corporate deposits, please, because this is a line item that has remained under GBP 200 billion or so for the last two years, and we're finally seeing a lot of growth come through the business. Not only the growth, but also the rates that you're paying on these corporate deposits, looking at your other disclosure, looks to be declining as well. I'd be interested to get some insight as to what's happening there. Secondly, on the cost base, I know first quarter had some increased investment and restructuring costs, but you also mentioned on the call earlier that the cost profile will be uneven through the year. Just wondering how you're thinking about that across the remainder of the quarters. Thanks.

Thanks, Sheel. I'll take deposits, Katie.

Yeah, sure.

Take costs. Yeah. I'm pleased you've noticed the trajectory there, Sheel. Deposits in the commercial bank is a big area of strategic focus for the team and has been, I would say, you know, increasingly over the course of the last 18 months. Part of the performance momentum there is around focus. Given also the growth we've seen in lending, there's been a natural need to increase deposits in the commercial bank. Focus has played a part, but we've also broadened the product range. We've also digitized parts of the product range as well.

We've got business focus, we've got enhanced proposition for different segments within the commercial and corporate bank. As you'd expect us to have, we also have a much brighter, broader focus on transaction banking, which obviously brings high value operational deposits. To your point, you know, depending on the nature of those deposits, high liquidity value, but also in relative terms versus interest-bearing deposits, good cost of funding. It's a strategic focus supported by, you know, a number of operational and tactical activities that support our client base, but also help the LDR. Katie.

Costs. Sure. Absolutely. You're absolutely right. Q1 is a little bit higher than normal, reflecting some of our decisions to front load investments and restructuring costs alongside staff and inflation-related increases from 2025. You'd expect me to say this, it's our history, it's what we deliver every single year. We are really confident in hitting our cost guidance of around GBP 8.2 billion. That excludes the impact of Evelyn. I'm just gonna take the opportunity just to talk a little bit about Evelyn costs. We'll share more about that as well Once we've finished the acquisition and things like that, which is going well. There are a few things that you need to be thinking about that will impact some of those Evelyn costs as they come through.

Obviously, first, we've got day one transaction costs. That was included in our guidance of the 130 basis points of capital. We've obviously got the operating costs that will come through from the point of consolidation in terms of Evelyn's own costs. We're then familiar, we've talked a lot about the costs to achieve in terms of the GBP 150 million total costs to achieve to drive the GBP 100 million of cost synergies. Finally, we are gonna have ongoing amortization of the intangibles that will be created upon completion. That doesn't impact our capital generation going forward as we've incurred that as part of the capital impact of the 130 basis points. Obviously, I'll give you more detail when we get to the point of completion, but when you think of lumpiness, they're absolutely rock solid on their 8.2.

That's where they'll land, 'cause they always do. There will be a little bit as Evelyn comes in. Think about that in your models of those four different kind of categories.

Yeah.

Hopefully, that's helpful to you, Sheel Shah, as well.

Great. Thanks, Sheel.

Next question comes from Aman Rakkar of Barclays. Aman, if you'd like to go ahead, ask your question.

Good morning. Good Morning.

Morning.

Hopefully you can hear me okay. Sorry.

We can. Yeah, we got you now.

I had two questions. Could I just trouble you on the deposit margin, please? I think that two pips deposit margin Q on Q contribution, I think it's the softest uplift Q on Q. You know, obviously you've got multiple moving parts in that, notably a, you know, a massive structural hedge tailwind. Presumably offset by compression on kind of actual deposit spreads in the quarter. I was interested in your sense of the deposit margin contribution on a sequential basis in coming quarters, please, and to what extent you think this kind of intense deposit competition dynamic, particularly for term deposits. I mean, lots of people raising term deposits at negative spread kind of feeds into that would be really helpful.

The second question was, broader question just around actually the income dynamic beyond this year, 'cause it feels like there's a building confidence around the income profile beyond this year, principally because of the interest rate environment. It's not really materially moving the needle on this year's guide as much as it perhaps will do on the forward look, not least because of the structural hedge. I'm thinking about the cadence for net interest income through the course of this year is presumably gonna be quite robust, right, in terms of what it means for the next year. Is that the right characterization?

What do you as a management team do with that, the kind of building confidence on the income outlook in the medium term versus, you know, what is quite an uncertain near term, you know, dynamic with the Middle East?

Sure.

Thank you.

Go on, Katie.

Shall I add one? Perfect. Deposit margin, you know, 2 basis points in this quarter. I think you need to just think a little bit about the overall movement imbalances in the quarter. You've got tax outflows, GBP 10.3 billion. They are predominantly in January. Some do dribble into February, but they are predominantly there. We're confident around the deposit margin expansion will be greater in the coming months as we move forward from here. If we then look at income beyond 2026, we expect annual income growth sort of through 2026 to 2028. We're confident in that growth trajectory. Obviously, disciplined growth across lending deposits and AUMAs continue in line with our CAL greater target of greater than 4%.

That will obviously be boosted by the Evelyn Partners acquisition when it comes online. The higher for a longer interest rate environment, we've got now got the terminal bank rate of 3.75% alongside the actions that we've taken, have already taken in Q1 to move higher in the yield curve, meaning that we are increasingly confident on the income tailwind from the structural hedge, supporting income all the way through to 2030. You've other variables like customer behavior, competitive behavior around pricing and macroeconomics. You know, we'll see how these develop, but again, you know, you can see what we've got in terms of our economics in there. Given that kind of interest rate sensitivity that we have, we do see that as a net positive for income beyond 2026. Overall, you know, confident.

Yeah.

.The, as, and building on our confidence that we had when we spoke to you in February as well. Thanks very much, Aman.

Yeah. To your final point, Aman, as, you know, how the management characterize that, I think as Katie finished there, net, feels like we're in a stronger position on income and returns, both 2026, but also looking out to 2028. Thanks.

Thanks, Paul.

Our next question that comes from Amit Goel of Mediobanca. If you'd like to unmute, Amit, and go ahead and ask your question.

Hi. Thank you. Hopefully, you can hear me okay.

Yeah. We've got you crystal clear.

Great. Good stuff. Yeah. One, just kind of following up. I suppose just on slide 30, just on that deposit margin and contribution, just trying to reconcile, you know, on each of the divisions, it seems like the cost is coming down, but on the group it's flattish. Just wanted to check what's driving that. Secondly, just on Evelyn, just curious, I mean, if you've got any color in terms of how the business has been developing since the acquisition announcement and, I guess, during the, you know, the first quarter and beyond in terms of AUA. Anything on that would be helpful. Thank you.

Great. Okay.

Would you like.

You go first and I'll. Yeah, yeah.

The first one.

Yeah.

Absolutely. If you look at the businesses, what that is that's representing the customer rate on deposits or loans. Whereas if I look at the group number, it's the overall cost, including hedging. It's not perfectly like for like, as you look across those two lines. Paul, Evelyn.

Yeah. Amit, obviously, I can't comment on a business that we don't yet own, so that wouldn't be appropriate. What I would say is in terms of the planning to close yet is going very well. You know, we're moving at pace. We hope to announce that in the coming months. The work on, the appropriate work on integration is progressing really well. You can see from our AUMA performance, as in NatWest, the AUM performance, the strength, net new money, you know, above 8%, again, despite the market movements, top quartile investment performance.

Going back to the AUM, kind of 10% up on year on year, which is great. There's a limit, there's a obvious limits to what I can say. In the work that we're doing so far, we're very encouraged. You know, I've spoken at length around the scale and the capabilities that Evelyn will bring. I think if you look at the success we're starting to have around retail investment and premier investment in the NatWest base, the acquisition of Evelyn is only gonna accelerate that. To me, the demand signals and the performance signals are good.

Once we've closed, as Katie alluded to earlier, in relation to the cost question, once we've closed, we'll obviously share a lot more detail in terms of the overall numbers and the plans, and we are eager to do that as soon as we can. Thanks, Amit.

Thank you very much. Our final questions come from Ed Firth of KBW. Ed, if you'd like to unmute and ask your question.

Good morning, everybody. Thanks for the questions. I just have two. The first one was just on detail. I think at the time of Evelyn, we were talking about GBP 300 million of revenue and GBP 300 million of costs in the first year. Is that still the right number we should be getting? That was just my first question.

Yeah. Nothing's changed since the original disclosures, Ed. That's the best way to think about it.

Perfect. Okay. Thanks so much. Then the second question was related to Jonathan's question, really, about risk. I'm just struck that in your sort of worst case scenario, you're talking about a GBP low few hundred million of credit losses, I guess, something like that. I know it's more than 99, it's not huge. That's on a GBP 30 billion tangible equity base, you're making pre-provision profits of GBP 10 billion a year. I'm just wondering, how do you think about appetite to risk? I mean, do you really feel confident that you're taking enough risk? It feels to me that potentially there's quite a gap there for you to be doing quite a lot more and growing revenue quite a lot faster than you are.

I guess related to that, can I just ask about slide 33 again? I mean, it's a great slide, and thank you very much indeed for giving it to us, and I wish all the other banks would as well. It does strike me that particularly your funds lending looks quite a lot bigger than I would ever have imagined. I mean, I don't know the market that well, but I guess you do. Are you a market leader in that space? Would you imagine that you are sort of bigger than most people, or would you think that you're just a player and that's pretty standard? Unfortunately, other people don't give us that sort of disclosure. Thanks very much.

Great. Okay. Thanks, Ed. Good to hear from you. Quite a few different questions there. We've got the kind of the extreme downside, kind of credit piece. Katie, why don't you.

I'll crack on.

You have a shot at that. I'll cover funds, and then there's a bit, I guess, linked to just on lending risk appetite as well.

Yeah, I'll crack on on impairment. You can jump in after that.

Yeah. Yeah.

Ed, what I'd probably do is guide you a little bit. If you go after the call on page 27 of our IMS today, we give you, I think helpfully, as a non-standard Q1 disclosure, what our new change in our scenarios would be. You can see that on the downside scenario for stage 1 and stage 2, it's GBP 99 million additional. If you went to the extreme downside, that's a GBP 2.7 billion hit, really very different in terms of numbers. You can also see that that's obviously greater than the hit we would have had at the year end in that space. I'd probably just rebalance your numbers a little bit on that. That's obviously just stage 1 and stage 2.

We would, I would kind of point out that that extreme downside is really quite far away from our base case. Obviously, it's blended into the number. I think we give it about a 14% probability kind of weighting. Quite far out there, but it is something to kind of consider as you look at the numbers. Paul, shall I come to you?

Yeah

the other one?

Thank you, Katie. On funds lending, I'm glad you like the disclosure, Ed, I would say. On funds lending, that's a really long-standing business for us, you know, in excess of 20 years. A large part of that business is in our RBSI, which is our Channel Islands business. Been in our disclosures for, you know, for all that period of time. Probably worth diving into a little bit of the detail. I wouldn't say we were a leader in that business. I'd say we're a strong player where we choose to participate. It's worth bearing in mind of that funds lending business, 80% of it is, I guess, what you'd know as subscription lines or capital call facilities.

That's where you kind of got exposure to LPs, and we take security charge over the LPs. Typically, that's pretty short-dated as well, just to give you a bit more context, you know, one to three years. When you look at that line, best part of GBP 17 billion is sub lines. The other part is NAV, which is a smaller part, kind of GBP 3 billion-GBP 4 billion, and that's where you're a senior, in effect, a senior creditor when you're lending onto a particular asset. Average LTVs, again, just to help you there, around 30%, and you've got an institutional investor base. Very long-standing business. It's been predominantly led out of our Channel Islands business. No historical losses.

A good business. There'll be as you look across European, U.S. banks, you know, you'll see different levels of exposure. I'd say we're strong, but certainly not a leader. Thanks.

In terms of risk, do we feel we've got the balance right with how much we're taking?

Well.

To get to his last question.

Yeah, I think I hear both, I guess, Ed, I hear both sides of the story. I, you know, from some investors I hear, you know, they really value the low-risk business model, well-diversified credit base, you know, high risk-adjusted returns that you see, and then you hear other side is could you take more risk? I think the way we've approached our different asset portfolios, both in retail and commercial, has, you know, has stood us in good stead. It allows us to perform well with a low cost of risk. We generate a high cost of, you know, a high amount of capital. You know, our RoTEs are obviously sector leading. It feels like that's, you know, we've got the balance right.

We do at times, you know, increase our risk appetite. You go back, you know, over the course of the last couple of years, you can see some of the moves we've made in retail. You know, we've broadened our addressable market in mortgages and credit cards. I kind of feel that, you know, a U.K.-centric, low-risk business model, high capital generation serves us well, so it feels like we're in the right space. Hopefully, that gives you a bit of insight into how management think about it, Ed. Thanks.

Thank you for all your questions today. I will now like to hand over to Paul Thwaite for closing comments.

Yes. Thanks, Oliver. I just wanna close with a, I think, a couple of key points, which I think are particularly important given the context we're in, and I think demonstrate why we think we're very well-positioned as a bank. The first one is our deposit franchise and the gearing that gives us to rates. Obviously, that's driven by our corporate franchise. It supports our revenue growth, especially in a higher-for-longer environment. The second thing I would point to is the growth track record that we've built and continue to build, and the targets that we've put out there. We think we've got a good track record and further opportunities across our three businesses. You can see also the progress we're making around cost management and our cost income ratio and continuing benefits of operating leverage.

To link it to Ed's question, if you look at the loan book, you know, and you look at the Bank of England stress tests, you know, we are the most resilient bank under stress. I think that's as a consequence of our diversified business mix. The lowest stress to draw down of any U.K. bank. You add all that up together, superior returns, high capital generation, which can drive stronger distributions. From my perspective, we feel very well-placed as we look into the circumstances that face us. Thanks for your time. I hope you have a good weekend. Cheers.

Thank you.

That concludes today's presentation. Thank you for your participation. You may now disconnect.

Good morning, and welcome to NatWest Group's Full Year 2025 Results Management Presentation. Today's presentation will be presented by CEO, Paul Thwaite; and CFO, Katie Murray. After the presentation, we will take questions.

Good morning, and thank you for joining us today. As usual, I'm here with Katie, who will take you through the full year performance. After that, I'll talk about our strategy and our new 2028 targets. But first, let me start with an overview of 2025, a year in which we delivered another strong performance and made good progress on each of our strategic priorities. Highlights of the year include a return to private ownership in May, opening a new chapter for the bank with a focus on driving growth. Continued organic growth, together with successful completion of the Sainsbury's Bank transaction, improving operational leverage with a reduction in our cost income ratio of 4.8 percentage points, together with strong capital generation, enabling total distributions to shareholders of GBP 4.1 billion. You will also be aware that we announced the acquisition of the financial planning and investment firm, Evelyn Partners earlier this week, which I'll talk about later. So let's turn to the headlines. We added 1 million new customers during 2025, and delivered broad-based growth across all 3 businesses. Lending grew 5.6% to GBP 393 billion, deposits were up 2.4% to GBP 442 billion, and assets under management and administration increased 20% to GBP 58.5 billion. This activity resulted in strong income growth of 12% to GBP 16.4 billion. Costs grew 2% to GBP 8 billion, resulting in positive jaws of 10%. The cost income ratio reduced to 48.6%. This led to operating profit of GBP 7.7 billion and attributable profit of GBP 5.5 billion. Earnings per share grew 27% to 68p, dividends per share increased 51% to 32.5p, and tangible net asset value per share was up 17% to 384p. Our CET1 ratio was 14% and return on tangible equity was 19.2%. As you can see here, these results are even in line with or above our strengthened guidance. Our strong risk management is evidenced by a loan impairment rate of 16 basis points, and total distributions announced in 2025 of GBP 4.1 billion comprised buybacks of GBP 1.5 billion and dividends of GBP 2.6 billion, in line with our payout ratio of around 50%. This includes the buyback of GBP 750 million announced on Monday, along with our acquisition of Evelyn Partners. These results continue our track record of delivering value for shareholders. Over the past 4 years, earnings per share have more than doubled, growing at a rate of 26% a year, dividends per share have more than tripled, increasing at a rate of 33% a year and TNAV per share has grown 41% at a rate of 9% a year. At the same time, our share count has reduced from over 11 billion to just under 8 billion. Turning now to our 3 strategic priorities. I'll start with disciplined growth. We now serve over 20 million customers across our 3 businesses, and 2025 marks our 7th consecutive year of growing customer balances. In Retail Banking, our customer base increased by more than 5%, and customer assets and liabilities grew 4% to GBP 421 billion. This includes the addition of around 1 million new customer accounts from the Sainsbury's transaction, which contributed to our unsecured stock share growing from 6.4% to 7.2%, including an increase from 9.7% to 10.6% in credit cards. In Mortgages, we increased our flow share of first-time buyers from 10% to 12% and of the buy-to-let market from 3% to 6%. We are also extending our reach through NatWest Boxed, which provides embedded finance to companies such as The AA and Saga. In Private Banking and Wealth Management, over 50,000 customers invested with us for the first time in 2025. Net new flows to assets under management grew 41% and assets under management and administration increased 20% to GBP 58.5 billion. AUMA is now 49% of client assets and liabilities, up 4 percentage points on the prior year and customer assets and liabilities grew 10% to GBP 119 billion. In Commercial & Institutional, we extended our expertise in FX to a further 700 mid-market customers during the year. Many of them via online platform for FX, Agile Markets, where the number of users grew 13%. This contributed to FX revenue growth of around 20%. Lending balance growth was strong at 10% or GBP 14 billion. We lend GBP 4.6 billion to the U.K. social housing sector, where we reached our GBP 7.5 billion ambition ahead of schedule and have announced a new GBP 10 billion ambition to 2028. We are also the leading lender to U.K. infrastructure projects, and we delivered GBP 19 billion of climate and transition finance towards our 2030 target of GBP 200 billion, of which GBP 16 billion was in Commercial & Institutional. I'd like to turn now to our second strategic priority, bank-wide simplification. We continue to invest to improve customer experience and increase efficiency. During the year, we made gross cost savings of around GBP 600 million, which is over 7% of our 2024 cost base. And we created GBP 100 million of investment capacity in 2025 to reinvest and further accelerate our transformation. Taking a look at each business. In Retail Banking, our award-winning app has a Net Promoter Score of 51. And as we continue to invest to improve customer experience, we launched more than 100 new features during the year. We also launched generative AI enhancements in our digital assistant, Cora. As a result, the number of queries that can be resolved has increased by 20 percentage points. The cost/income ratio in Retail Banking decreased from 50% to 45%. In Private Banking and Wealth Management, we doubled the number of enhancements on the app, increasing our rating on the App Store to 4.4 and our Net Promoter Score to 54, up from 50 at our spotlight last June. In addition, we are leveraging group capabilities to simplify our operations. For example, we rehosted our core banking platform from Switzerland to the group data center in the U.K. and we are co-locating our people with other NatWest teams. So we are relocating our tech team from Switzerland to the U.K. and India. The cost income ratio in Private Banking and Wealth Management reduced 10 percentage points to 64%. In Commercial mid-market banking, we are investing in our digital platform, Bankline to give customers a single point of access to a wide range of products. We have now integrated our asset finance, invoice finance, payments, commercial cards, FX and trade platforms within Bankline, and customers access products via Bankline around 300,000 times last year. We also took steps to reduce our legal entities and branches in Europe. The cost income ratio in Commercial & Institutional reduced from 52% to 49%. Turning now to our third strategic priority, managing capital and risk. We generated 252 basis points of capital during the year, supported by reducing RWAs by GBP 10.9 billion through capital management. This includes 5 significant risk transfers in Commercial & Institutional and a GBP 2 billion mortgage securitization in Retail Banking. We have a high-quality lending book in all 3 businesses with a low level of impairment at 16 basis points of loans. And all this enables us to recycle capital into areas where we have chosen to grow. The successful implementation of our strategy gives us the ability to invest in the business, support customer growth and deliver attractive returns to shareholders. As I mentioned earlier, we have announced total distributions of GBP 4.1 billion for 2025, representing 75% of attributable profit. With that, I'd like to hand over to Katie to take you through our financial performance.

Thank you, Paul. I'll start with our performance for the full year, where, as Paul said, we have either met or exceeded our third quarter guidance. Income, excluding all notable items, was up 12% at GBP 16.4 billion. Total income included GBP 241 million of notable items. Total operating expenses were 1.4% higher at GBP 8.3 billion and the impairment charge was GBP 671 million or 16 basis points of loans. Taken together, this delivered operating profit before tax of GBP 7.7 billion and profit attributable to ordinary shareholders of GBP 5.5 billion. Our return on tangible equity was 19.2%. Turning now to the fourth quarter compared with the third. Income, excluding all notable items, was up 2.5% at GBP 4.3 billion. Operating expenses were GBP 2.2 billion, including the annual bank levy. The impairment charge was GBP 136 million or 13 basis points of loans, bringing operating profit before tax to GBP 1.9 billion. Profit attributable to ordinary shareholders was GBP 1.4 billion. Our return on tangible equity was 18.3%. Turning now to income. Full year income, excluding notable items of GBP 16.4 billion exceeded our guidance of around 16.3%. Across the 3 businesses, income grew by GBP 1.8 billion. This was largely driven by higher net interest income as balance sheet growth and the benefits of the structural hedge more than offset the impact of the Bank of England rate cuts. Net interest margin was up 21 basis points to 234 basis points, mainly due to deposit growth, coupled with margin expansion. Noninterest income grew 1.3%, reflecting solid customer activity as we supported their investment, FX and capital requirements. Turning to the fourth quarter. Income, excluding notable items, grew 2.5% to GBP 4.3 billion. Across our 3 businesses, income increased by 2.8% or GBP 116 million. Net interest income grew 4.5% or GBP 148 million, reflecting the trend over the year or volume growth alongside margin expansion. As a result, net interest margin was up 8 basis points to 245 basis points. Noninterest income across the 3 businesses was down 3.7%, mainly driven by Commercial & Institutional, reflecting typical seasonality after a strong third quarter. Turning to 2026 guidance, which excludes the impact of Evelyn Partners. We expect income, excluding notable items, to be within a range of GBP 17.2 billion to GBP 17.6 billion, and our current forecast is within this range. Turning to growth. As you heard from Paul, our 3 businesses have a strong track record of growth over the last 7 years. We have grown customer lending at 4.5% a year. This includes broad-based organic growth as well as acquisitions, which support scale and underweight areas such as mortgages and unsecured lending. Customer deposits have grown 3.9% a year supported by a boost during COVID as well as new propositions and an improved digital offering. AUMAs have grown at 12% a year and have more than doubled since 2018. These 3 elements together make up customer assets and liabilities, or CAL, which has grown at 4.6% a year. We focus on this metric as it reflects the breadth of balance sheet solutions we offer to meet customer needs. This track record gives us confidence that we can continue to grow CAL in the future, and Paul will talk more about our 2028 target shortly. Let me take you through the last year for each of these elements in turn. We delivered another year of strong lending growth. Gross loans to customers across our 3 businesses increased 5.6% or GBP 20.9 billion to GBP 392.7 billion. There was broad-based growth across Mortgages as we increase our flow share of the first-time buyer and buy-to-let markets with strong retention as well as new business flows. Unsecured lending growth was supported by the addition of Sainsbury's Bank balances and the first full year of our personal loans offering for the whole of market. In Commercial & Institutional, we grew in all 3 businesses with lending up GBP 14 billion or 10% excluding the repayment of government loan schemes. This reflects our leading position as the U.K.'s biggest bank for business with growth across social housing, residential commercial real estate, infrastructure, project finance and fund lending. I'll now turn to deposits. Customer deposits across our 3 businesses increased 2.4% to GBP 442 billion with a stable mix throughout the year. Retail Banking deposits increased GBP 7.8 billion or 4%, reflecting growth in savings and current account balances, supported by balances acquired from Sainsbury's Bank. This includes growth in the fourth quarter of GBP 6.8 billion, reflecting strong growth in savings of GBP 6.4 billion, supported by our limited edition Saver and term products and growth in our current accounts of GBP 0.4 billion. Private Banking and Wealth Management increased by GBP 300 million in 2025, also reflecting growth in current accounts and saving balances with progress driven by both deeper engagement with our existing customers and new customer acquisition. And C&I deposits increased GBP 2.3 billion, reflecting growth within large corporates and business banking. Moving now to assets under management. We are pleased to see the plans we talked about at the June spotlight delivering for our customers and shareholders. AUMAs increased almost 20% this year to GBP 58.5 billion and net flows of GBP 4.6 billion were up 44%. Fee income from higher AUMAs grew 11% to GBP 300 million. Moving now to the continued tailwind from our structural hedge. As you will be aware, in addition to our product structural hedge, we also have a longer duration equity structural hedge. Together, they are GBP 198 billion in size, GBP 4 billion higher than last year, and are an important driver of income growth. In 2025, product hedge income was GBP 4.2 billion, this is GBP 1.2 billion higher than the previous year and GBP 3.2 billion higher than 2021. Our equity hedge income was almost GBP 500 million which is around GBP 50 million higher than the previous year and around 25% more than 2021. The yield on both hedges has increased significantly over the last few years as interest rates rose. This slide shows our expectation for future yield progression based on our current macroeconomic assumptions and hedge durations together with associated income growth. We expect yield to increase from 2.4% in 2025 to around 3.1% in 2026, with further increases thereafter. Our illustration here assumes steadily increasing average notional balances for both the product and equity hedges, driven by growth in CAL and higher levels of capital held to support that growth. This expectation of increasing yield and notional balances drives higher annual income through to 2030. We are sharing our expectations for this year and next as more of the near-term income growth is locked in. We expect 2026 total hedge income to be around GBP 1.5 billion higher than 2025 and for 2027 to be around GBP 1 billion higher than 2026, reaching total income of around GBP 7.2 billion. Exactly how this develops will be subject to the prevailing reinvestment rates each year as well as the composition of growth in CAL. Turning now to costs. Other operating expenses were GBP 8.1 billion, including onetime integration costs of GBP 96 million, in line with our guidance. We are pleased with our delivery of around GBP 600 million of gross cost savings, which has allowed us to invest in business growth and accelerate our simplification program. Costs grew 1.8% if you exclude onetime integration costs. Our cost income ratio reduced to 4.8 percentage points to 48.6%. In 2026, we expect other operating expenses to be around GBP 8.2 billion. Staff costs will be a key driver of overall cost growth. We also made significant investment in the business each year with a range of initiatives to drive operating leverage. We expect further supplier contract inflation and increased business transformation costs this year. Delivery of around GBP 8.2 billion in 2026 will be supported by another year of significant gross cost savings. Turning now to our updated macro assumptions. Our base case outlook for the macro environment in 2026 assumes moderate growth, slightly lower than our previous year. The unemployment rate increased slightly above our expectation for 2025 and we now expect this to peak in 2026 at levels we are comfortable with in terms of lending risk appetite. We also expect inflation to come down at a slightly faster pace given the most recent print. And we expect lower rates reaching a terminal bank rate of 3.25% by the end of 2026. Our balance sheet remains well provisioned with expected credit loss of GBP 3.6 billion and ECL coverage of 83 basis points. We are comfortable with 1.1% of Stage 3 loans, which is down on the prior year, reflecting management actions in our personal portfolio, together with lower defaults in our nonpersonal portfolios. Our remaining post model adjustments for economic uncertainty are GBP 246 million, broadly stable in the third quarter. We will continue to assess these provisions each quarter and release as appropriate. Our latest scenarios also show that even if we were to give 100% weight to our moderate downside scenario, this would increase Stage 1 and 2 ECL by GBP 54 million. I'd like to turn now to the impairment charge for the year. Our prime loan book is well diversified and continues to perform well. We're reporting a net impairment charge of GBP 671 million, equivalent to 16 basis points of loans. There were no significant signs of stress across our 3 businesses and impairment levels across our products have performed broadly in line with our expectations. In 2026, we expect our loan impairment rate to be below 25 basis points. This guidance is not dependent upon post-model adjustment releases or any material shift in risk appetite. It's simply a reflection of normalization in impairments and lower one-off releases as well as growth in the book and ongoing changes in the mix. Turning now to capital. We ended the year with a Common Equity Tier 1 ratio of 14%, up 40 basis points on last year. In 2025, very strong capital generation of 252 basis points took our CET1 ratio before distributions to 16.1%. Distributions accounted for 213 basis points of capital, including accruals for our ordinary dividend payout of around 50% and our buyback of GBP 750 million that we announced on Monday. Risk-weighted assets increased by GBP 10.1 billion to GBP 193.3 billion, within our guided range. GBP 3.8 billion of higher operational risk-weighted assets includes GBP 1.6 billion in the fourth quarter as we brought forward our annual operational risk recalculation from the first quarter in 2026. You should now expect us to include this in the fourth quarter each year. GBP 11.1 billion of business movements broadly reflects our lending growth across the year. This was largely offset by a GBP 10.9 billion reduction from RWA management, including GBP 5.7 billion in the fourth quarter. So in essence, our actions this year have funded the growth in our lending book. Other movements include GBP 7.3 billion from CRD IV model inflation, of which GBP 4.8 billion was in the fourth quarter. We think we are now largely done, so we await PRA approval of our models. There was also GBP 1.2 billion of other risks and FX movements. Going forward, we expect a further impact on RWAs with the implementation of Basel 3.1 in January 2027. Based on our latest recalibration of a higher balance sheet, we currently expect this to increase RWAs by around GBP 10 billion. The majority of the RWA uplift from Basel 3.1 is due to operational risk and the removal of the SME and infrastructure support factors. We do expect an offset in our Pillar 2 requirements at the same time for these elements, but the net result will still require us to hold a higher nominal amount of CET1 given the offsets are at a total capital level. We also expect future growth to consume more capital in the form of RWAs. Despite this, we are confident in our ability to continue generating strong capital from earnings and to manage risk-weighted assets, and we are guiding to capital generation of around 200 basis points before distributions in 2026. Turning now to our CET1 ratio. Our CET1 target of 13% to 14% has been in place since 2019. As you know, we've been actively looking at this over the last year or so. Today, our minimum CET1 requirement stands at 11.6%. And as you know, there are no changes to the capital requirements in the latest FTC review. So our supervisory minimum remains 11.6%. And we expect this to reduce further with the implementation of Basel 3.1 next year with a reduction in our Pillar 2 requirement, as I just mentioned. Today, we are holding considerably more capital despite derisking. The successful restructuring of the bank is evident from the consistent and material improvement in our Bank of England Stress Test results. The performance of the business has materially improved, and we have demonstrated a track record of strong earnings, high capital generation and returns. So as a result of all of these considerations and taking into account the views of stakeholders, including investors, rating agencies and regulators, we are reducing our CET1 target to around 13%. This represents a healthy buffer over our MDA and supervisory minimum requirements and also reflects the expected reduction in Pillar 2 requirements on the 1st of January 2027. Turning now to our acquisition of Evelyn Partners. As we outlined on Monday, we see a strong strategic rationale for this acquisition. It brings GBP 69 billion of AUMA scaling our Private Banking and Wealth Management to 20% of group CAL, a third growth engine for the group. It increases fee income by almost 20% on Day 1. And ultimately, it makes us a faster-growing, higher-returning bank with higher distribution capacity for shareholders. Operationally, it is deliverable; culturally, we are aligned and financially, it delivers for shareholders. So let me show you how we expect to deliver a return on invested capital above that generated by our share buyback by year 3 after completion. We provided you with Evelyn Partners, 2025 income, costs and earnings before interest, tax depreciation and amortization, or EBITDA. Revenue synergies include bringing Evelyn Partners a broad range of financial planning and Wealth Management solutions to all our customers, enhancing our D2C investment offering via BestInvest, leveraging Evelyn Partners technology for portfolio management solutions and providing Evelyn Partners customers with our full range of banking solutions and combined wealth management offering. The business has grown AUMA at more than 7% a year for the last 2 years and bringing the combined capabilities to our customer base of more than GBP 20 million is a significant opportunity to create value. The benefit of being part of NatWest Group should deliver income greater than GBP 700 million. We expect to realize around GBP 100 million of cost synergies by removing duplication in shared services and technology applications. where there is high alignment between our platforms as well as efficiencies of scale. The cost to achieve of approximately GBP 150 million will be phased over 3 years. This means we expect costs to fall in absolute terms to less than GBP 300 million by year 3. Together, this drives EBITDA of around GBP 400 million. When assessing the transaction, we look at the returns accruing to capital. In other words, the return on invested capital. We do not include the amortization of purchased intangibles since amortization does not flow through to capital and does not impact our distribution capacity to shareholders. The cost of intangibles are taken in the day 1 impact of around 130 basis points on the CET1 ratio. Amortization is included in return on tangible equity. This is a capital-light business with very high returns on tangible equity, clearly accretive to the group in year 1 and beyond. Beyond year 3, we see further improvement in returns, driven by compounding net new money growth, driving higher assets under management and ultimately, stronger income growth. Turning now to returns. This shows the drivers of return on tangible equity in 2026. The notable items in 2025 income and tax credits, which together account for around 1.3 percentage points of RoTE. Clearly, the year-on-year change in some P&L lines will impact RoTE more than others with income growth being the biggest driver. Naturally, the level of return will also be impacted by growth in the denominator average tangible equity. This will be driven by earnings, balance sheet growth and further unwind of the cash flow hedge reserve. Overall, in 2026, we expect to deliver a return on tangible equity of greater than 17%. So to summarize our guidance. Excluding the impact of Evelyn Partners acquisition in 2026, we expect income, excluding notable items, to be in the range of GBP 17.2 million to GBP 17.6 billion, other operating expenses to be around GBP 8.2 billion, the loan impairment rate to be below 25 basis points, capital generation before distributions of around 200 basis points and a return on tangible equity greater than 17%. With that, I'll hand back to Paul. Thank you.

Thank you, Katie. So you've heard about our guidance for 2026. I'm now going to talk about our plans for the next 3 years and 2028 targets, which include the impact of the Evelyn Partners acquisition. You will be familiar with this slide, as you've heard about each 1 of our 3 businesses over the past year in our investor spotlights. We are building on strong foundations with a customer base of more than 20 million and leading positions in each of our businesses, all of which deliver attractive returns. Our Retail Bank has a track record of growing share profitably, with an opportunity to align areas such as mortgages, savings and unsecured lending more closely with our 16.5% share in current accounts. Private Banking and Wealth Management is a leading private bank with a strong brand and acts as a center for excellence within the group for investment products and solutions. With the acquisition of Evelyn Partners, a market-leading financial planning and investment management firm, we are creating the U.K.'s leading Private Bank and Wealth Manager. The combination increases assets under management and administration to GBP 127 billion and CAL to GBP 188 billion. It both transforms the scale of the business and the breadth of our financial planning and investment offering to meet more customers' needs across the group, further accelerating growth in assets under management. Commercial & Institutional is the U.K.'s biggest bank for business with a 25% share of deposits and 20% share of lending. We are a leading bank for start-ups in the U.K. with the largest presence in the mid-market sector where we see significant opportunity. The scale and strength of our customer franchise gives us a strong base to build on with plenty of capacity for further growth. We believe the macro economy in the U.K. provides a supportive environment, consumers in aggregate are managing well. You can see here that households are paying down debt and savings rates are high. Despite a challenging environment, particularly for sectors such as retail and hospitality, U.K. corporates are delevering and investments is steadily increasing. In addition, there are reasons to feel confident about the broader economy. In the housing market, interest rates are coming down, the government have set ambitious building targets and is committed to investing in social housing. There is a huge shift of generational wealth to younger generations underway. Whilst the FCA's advised guidance boundary review opens up an opportunity for thousands of people who currently receive no financial advice. And the U.K. is home to high-growth sectors and businesses with an innovation sector that is growing faster than the U.K. economy. It's against this backdrop that we have been thinking about our strategy and 2028 targets. Our strong performance in recent years demonstrates that our strategy is working. However, we review it on an ongoing basis and have refined our 3 priorities as we raise our ambition for the bank and target a 2028 return on tangible equity greater than 18%. So let me talk about each priority in turn. We remain committed to pursuing disciplined growth with an emphasis on returns. First, by focusing on key customer segments; second, by making it easier for customers to engage with us; and third, by broadening our propositions to ensure we serve more customers' needs. Our second priority has evolved to become leveraging simplification, reflecting the advances and progress we have made. We will continue to invest, in particular, in AI to drive growth, improve productivity and enhance the customer experience. And we will continue to manage our balance sheet and risk well by redeploying capital to drive returns and by putting a greater emphasis on dynamic pricing as we increase our speed and agility with more advanced data and analytics. The purpose of these priorities is to deliver growth at attractive returns for shareholders. Our increased ambition on returns is underpinned by 3 new targets growing customer assets and liabilities at an annual rate greater than 4% from 2025 to 2028, reducing our 2028 cost-income ratio to below 45% and generating more than 200 basis points of capital before distributions, whilst operating with a CET1 ratio of around 13%. These targets take into account the acquisition of Evelyn Partners. So let me talk more about how we aim to achieve this, starting with disciplined growth. In Retail Banking, our focus is on youth families and the affluent segment. In the youth market, we are building on the success of our RoosterMoney app, which has grown its customer base 15x to well over 0.5 million. We bank 1 in 3 families in the U.K. and want to build on connections within families and households through savings and mortgage relationships, for example. We also have a clear opportunity to grow in the affluent segments. We have around 1.2 million affluent customers in the Retail Bank, yet just 0.5 million use our premier proposition. So our aim is to grow our premier customer base to 1 million and travel the number of Retail customers who choose to invest with us. The Evelyn Partners acquisition will help accelerate the delivery of this ambition. It both enhances our direct-to-consumer investment platform with BestInvest and broadens our financial planning and investment offering. Private Banking and Wealth Management aims to increase the number of clients with more than 3 million of assets and liabilities by more than 20%. This will be supported by trebling the number of referrals from Commercial & Institutional. In Commercial & Institutional we want to remain the leading bank for U.K. startups and for the commercial mid-market. We serve over 1 in 4 businesses in the mid-market segment, businesses that are growing at a higher rate than the U.K. economy. We have an unparalleled presence across the U.K., enabling us to build deep relationships based on strong local and sector knowledge and we are building on our position as a leading lender to U.K. infrastructure and U.K. social housing as well as our strength in trade and climate and transition finance. Our second lever to deliver growth is making it easier for our customers to engage with us by combining our best technology with the support of our people. In Retail, most customers bank digitally but we also have over 1,000 personal bankers and relationship managers with a 24-hour call service for premier customers. Private Banking and Wealth Management has 250 advisers and specialists in Coutts, together with an award-winning app supported by Coutts 24, which answers calls 24 hours a day. Evelyn Partners adds 270 financial planners, 325 specialist investment managers and its own direct-to-consumer investment platform, BestInvest. Again, it combines expert, personal service with digital excellence. Commercial & Institutional has a digital platform bank line, an unparalleled network of around 1,000 relationship managers in commercial mid-market banking and a network of 12 accelerator hubs around the U.K. to help entrepreneurs grow and scale their businesses. We continue to invest in enhancing the digital experience for customers as technology advances and expectations evolve. For example, we are transforming our digital assistant, Cora by deploying generative AI so that it can resolve more complex customer needs. We are moving our data onto a single platform to deliver more personalized propositions. And in Commercial & Institutional we are investing GBP 100 million over several years to transform Bankline into a state-of-the-art digital platform giving business customers a single point of access to many of our products and services. Ultimately, we want a joined-up experience, which adds value for the customer however they choose to engage with us. We also want to meet more customers' needs by broadening our offering. For Retail Banking, this includes areas like home buying with more support for first-time buyers with family backed and shared ownership mortgages, offering more flexible savings accounts, developing tailored propositions for premier customers and entering point-of-sale lending. Private Banking and Wealth Management is primarily focused on investments. We are broadening our investment proposition to attract both high net worth clients and customers in the retail bank. We are preparing our response to the FCA's recommendation for targeted support following their advice guidance boundary review and we are broadening our deposit offering. In Commercial & Institutional we see the U.K. innovation economy as a key opportunity. Last year, we created a dedicated venture banking team to support innovative venture back scale-ups and we opened new business accelerators last year with 4 leading universities, which acts as incubator with a plan to expand this to 10 over the next 2 years. By continuing to deliver disciplined growth, our aim is to grow customer assets and liabilities across our 3 businesses at a rate greater than 4% a year, equivalent to more than GBP 120 billion of balance sheet growth by 2028. This will be a mix of broad-based lending growth, higher customer deposits and strong growth in assets under management and administration. We have already demonstrated our track record of growth. Retail Banking makes up 44% of our customer assets and liabilities, where we have grown more than 5% a year over the past 7 years. Private Banking and Wealth Management is currently 13% of CAL with a strong growth rate of 8.3%. This will grow to around 20% of CAL with the inclusion of Evelyn Partners and Commercial & Institutional represents 37% of CAL with a growth rate close to 3%. Moving on now to our second strategic priority, leveraging simplification where I'll start with architecture and data. We expect to drive a further GBP 100 million of investment capacity in 2026 by leveraging technology together with further streamlining our processes and governance. We have already made significant progress simplifying our systems and reducing duplication. For example, we decommissioned 200 business applications across the group last year, and we successfully migrated 1 million customers from Sainsbury's Bank covering multiple products. Last year, we announced the collaboration with Amazon Web Services to accelerate our data, analytic and AI capabilities. This collaboration will give us a single view of each customer's relationship with the bank as well as the tools to analyze data and enrich our customer understanding. Deployment of AI is not only helping us to automate routine work such as call summarization, it is also helping our coders to be more productive. Over 12,000 software engineers are now able to use AI assistance to generate code. This transformation has enabled us to improve the deployment frequency of updates across the group by more than 4x since 2021 and more than trebled the new features on our commercial banking digital platform Bankline. This investment is also increasing our operational resilience. We have reduced the number of critical incidents from 9 in 2021 to 1 last year. Our ambition is to become the leading bank delivering personalized customer propositions powered by the responsible deployment of agentic AI. So we are building out our capabilities across the bank. Last year, we set up an AI research office focused on improving customer experience and efficiency by accelerating the use of AI in fields such as multi biometrics, audio-visual conversational AI using proprietary small language models and ensuring algorithmic furnace as well as data safety. This shift to a agentic AI marks a transition from simple chatbots to autonomous systems that can execute complex banking workflows on behalf of our customers. By prioritizing these capabilities, we can move beyond basic automation towards a simpler, data-driven experience that meets rapidly evolving customer expectations. Many of the building blocks that will make this vision a reality will go live this year. This quarter, our customers will be able to ask questions about their recent spending in their own words on their app. And later this year, we will launch voice-to-voice conversations and more agentic fraud support. By delivering income growth ahead of cost growth, we expect to reduce our cost income ratio below 45% by 2028. Our track record of tight cost control gives us competitive advantage as it enables further growth. So our ambition is to strengthen our position as the most efficient large bank in the U.K. Turning now to our third strategic priority, active balance sheet and risk management. The strength of our capital funding and liquidity position provides significant opportunity to deliver continued balance sheet growth, together with attractive sustainable returns for shareholders, whilst operating with a CET1 ratio of around 13%. Our loan-to-deposit ratio of 88%, demonstrates the strength of our 3 businesses and our capacity to deliver material lending growth to support our customers and the U.K. economy. We continue to recycle in efficient lower returning capital into attractive growth areas to drive higher returns, and we have been active in significant risk transfers and credit risk insurance to increase capital efficiency. You can also expect to see a greater emphasis on the use of advanced data analytics to drive faster pricing, credit and asset enablement decisions. In addition, data analytics will help us manage risk dynamically, whilst optimizing risk-adjusted returns. We will continue to deliver our through-the-cycle cost of risk of 20 to 30 basis points aligned with our risk appetite. And we also want to maintain our market-leading position in customer fraud prevention with multi-biometric authentication. Our aim in pursuing disciplined growth, leveraging simplification and managing capital and risk is to drive strong growth and returns for shareholders. Given our strong track record of delivery, we are raising our future ambitions. So let me sum up with our 2028 targets. We aim to grow customer assets and liabilities at a rate greater than 4% a year as we continue to drive disciplined growth. We are targeting a cost income ratio below 45% as we drive positive operating leverage and we aim to generate more than 200 basis points of capital before distributions, whilst operating with a CET1 ratio of around 13%. Strong capital generation gives us the ability to support customer growth, invest in the business and deliver attractive returns to shareholders. We are targeting a return on tangible equity greater than 18% in 2028, and we expect to maintain our dividend payout ratio of 50% with scope for surplus capital to be returned via buybacks. Thank you very much. We'll open it up now for questions.

[Operator Instructions] Our first question today comes from Sheel Shah from JPMorgan.

I've got two, please. Firstly, on costs. The GBP 600 million of cost saves that you've seen in 2025, could you talk about where that's come from? And how we should think about the level of cost saves coming in 2026, particularly with regards to some of the technology developments that you've spoken about? And should we be thinking about a cost growth towards the out years of around sort of a 2% level going forward? And then secondly, in terms of the greater than 4% customer assets and liabilities target, I was wondering if you can disaggregate this across the divisions? And maybe more specifically, would you expect all of the business areas to be at this target level? And maybe sort of pointing up the corporate business here. Looking at that, it is slightly below target in recent years. So I'm just wondering whether you expect a pickup in this business.

Thanks, Sheel. I appreciate it. So, Katie, I'll talk generally about cost, you maybe want to come in around the outer years on cost and then I'll cover the CAL piece as well. So Sheel, on the -- first of all, I'd say we're very pleased with the momentum in the cost line. Obviously, nearly 5% reduction in the cost/income ratio this year. That's 20% plus over the last 4 years. So it feels like we've got a really good flywheel going in terms of driving out efficiencies and productivity in the business, reinvesting some of that capacity but making the bank more productive and more efficient going forward. In terms of your question around what levers are we pulling. It's a really broad range of levers, I would say. A key part of it is the kind of historic and current tech investment. That's driving a lot more digitization, automation. We continue to decommission a lot of applications. We've consolidated a lot of platforms. So that's really helping. We've also become a lot more efficient in how we do change. We talk about that in the presentation, GBP 100 million of benefits. In effect, we can do more change at lower cost, which is great for the customer, but also great for the cost outlook. And we're also continuing to simplify the business more generally, Sheel. So property consolidation would be one organizational simplification, legal entities, et cetera. So there's a whole range of costs -- a whole range of levers. And that's why for '28, we've said less than 45%, but we still -- and we see opportunity beyond that because we're very comfortable that this flywheel is heading in the right direction. Katie?

Sure. Thanks very much. So look, Sheel, as I look to it, obviously, operating costs GBP 8.2 billion for next year, it's very much as Paul says, it's the ongoing cost savings that we have, the higher investment spend on data and tech and the kind of -- as well as the higher business transformations and the benefits that we're seeing on that. We do expect -- you would be surprised to hear me say to continue our really cost tight management as we go out into 2028 and really ensure that we're getting the benefits of that investment spend and that they are realized. We do expect positive jaws in each year. We've brought in the cost/income ratio target of below 45% versus the very strong 48.6% we've already printed for 2025. That target does include the cost and, of course, income from Evelyn Partners, including our ongoing investment in that business. And I would say, if I had to look beyond 2028, I would expect to see further improvement in that ratio from here as well. So as ever, a very tight cost picture.

Great. Thanks, Katie. And then, Sheel, on your second broader question around CAL or customer assets and liabilities. We're not going to give you the exact -- and you probably don't expect it, the exact kind of split of growth. But what I'd encourage you to think about is we're very confident about growing across all aspects of CAL, lending, deposits, assets under management. Given it's a 3-year cycle, we're going to push hard to grow where the opportunities present themselves. Obviously, the environment will change. So different opportunities will be attractive at different times. I do think it's reasonable to expect that some areas will grow faster than others. If you look -- as you alluded to, if you look at our growth over the last couple of years, assets under management have typically grown at a higher CAGR. So 12% on average over the last 7 years. Evelyn will obviously accelerate that given the compound growth in that business of 7%. On lending, I'd say a broader picture, Sheel, very confident we captured -- I mean, historically, NatWest is a lending and credit franchise, and we can capture demand when it's there. So I'd expect lending growth across mortgages and retail, unsecured, but also, as you can see the growth in the Commercial & Institutional lending book in '25, GBP 14 billion, up 10% up. So we're not going to give you the breakdown, but I would plan across both lending, deposits and AUMA, and we're very confident that it will be greater than the 4% each year target for '28.

Our next question comes from Benjamin Caven-Roberts of Goldman Sachs International.

So I just wanted to ask a first one on profitability and a second 1 on the hedge. So if we look at the 19% return on tangible in 2025, I know there were a few factors which helped that result, including very low impairments, strong markets results, higher average bank base rate than likely in future years and a slightly lower effective tax rate than is modeled by consensus for the medium term. But aside from those, what would you call out as factors that you might see as being less favorable year-on-year in 2026? All elements of conservatism that effectively contributes to the sequential decline in RoTE on the lower end of your 2026 guidance. Put differently, is it fair to think of underlying RoTE as continuing to go up from here? And then secondly, on the hedge tailwinds through to 2030, has anything changed in the structure, duration or notional assumptions of the hedge to facilitate that very strong uplift in '26 and '27 and then the continued uplift through to 2030?

Thanks, Ben. Katie, do you want to take either order?

Yes. No, absolutely. So I'll start off with RoTE. So obviously, looking to our RoTE guidance of greater than 17% in 2026, you can see that we've got a record of high teens percent returns in there. So I wouldn't get too focused on the underlying versus this and that kind of coming in. We're very confident on delivering on this guidance. We did have a little bit of a boost in the year, but things come in at different points. I think the important thing to remember is that we will continue to build capital both through this year as we get to the end of 2026 with Basel 3.1 coming in on January 1. That's the next GBP 10 billion of regulatory capital along there. And then alongside our P&L guidance, you should expect that average growth coming through on the tangible equity as well, which kind of is what pulls your RoTE back a little bit. It's important not to forget that. We're obviously, also, guiding you on the strong capital generation that we can see coming through and there will be the movement during the year of 130 bps as we have CET1 coming in. But overall, I guess as I look at the number, there's not one thing I would say, look at that as a negative or a drag particularly, but I would encourage you to think of CAL growth and how it feeds through to the TNAV growth. If I then kind of take you on to the hedge in terms of where we are and then kind of how it's kind of structuring as we go forward from here. Look, when we look at the hedge, there's a number of different things that we kind of bring into that. One of the debates we've been having is around the hedge duration and what we've been looking at. We are very stable at 2.8 years. It's important to reflect -- to remember that, that reflects the product hedge at 2.5 years and the equity hedge at 5 years, which puts obviously 5 and 10 in kind of duration. We spend a lot of time looking at the behavioral life of different deposit types, different cohorts across the deposit franchise of our 3 businesses. We're very happy to see the deposit stability and the growth over this last year. We look obviously backwards, but we also look forward in terms of what we're expecting there. We give consideration of how things might evolve in the future as we go forward from here. So conversations, you'd expect us to be having around things like digital currencies, stablecoins, tokenized deposits as well, of course, the absolute competition that we see in this market. We continue to dynamically monitor that and assess that over time and how we reinvest the hedge at the different lifetimes. And I think the other thing that's important, that I'm not sure you all think about enough as well as also the relative size of both of those hedges in terms of how they sit and what that then does to your kind of this averaging out of the age of the hedge. I'd say one thing in addition, we do review our hedging instruments as gilts have repriced, we have actively been reinvesting our maturing 10-year swaps into 10-year gilts, which provides a pickup in yield that increased -- that contributed about GBP 50 million additional income from the equity hedge in 2025. Very comfortable with the approach we have which is kind of mechanistic and we talk about it is that a lot. It has a huge amount of thought that goes into the background to make sure we deliver the really quality returns that you see coming from this hedge year after year.

Our next question comes from Robert Noble of Deutsche Bank.

On Evelyn, did you look at anything else in the space as a potential acquisition? There are a list of wealth managers that trade at lower multiples. So what makes this specific one worth of premium compared to others? If I could ask about AI as well, there's been a route in the market this week and wealth managers and then more generally across the last kind of few months. Could you talk specifically about the risks from AI in this space? And then if we could broaden it out to traditional banking, what risk do you see from AI on deposit spreads, particular or any other material risk you see in banking from AI as well?

Thanks, Rob. So we got Evelyn, AI and Wealth and then more broadly on I guess, AI impact on banking. Okay. To the first question, as you'd expect, Rob, we monitor a number of participants and actually have done for a number of years. As you alluded to, there's private entities, there's listed entities, there's different business models. In terms of Evelyn, we absolutely thought it was the right fit for NatWest, very strategic acquisition, creating one fell swoop, the #1 combined private bank and wealth manager in the U.K. It transforms our wealth business, increases the scale of 2x from an assets under management perspective. And most importantly, or as importantly, brings key capabilities that will complement our proposition a direct-to-consumer platform, BestInvest, the largest employed financial adviser network in the U.K. and a broad suite of investment products and propositions. So it was the combination of the scale, Rob, but also the capabilities that it brings. And it positions us, I think, excellently, for what is obviously going to be a growth area over both the short, medium and long term. We know that customer demand is increasing around financial planning, financial advice. As you see intergenerational wealth transfer that's only going to increase. I think it's an area that's going to be amplified by tech and AI, and I'll come back to that because I think it's going to make advice more accessible and more affordable. And it's obvious we have regular -- helpful regulatory tailwinds as well, whether that's the FDA's advice, guidance and boundary review, whether it's the targeted support developments, which will drive advice to more people that start in April. So for us, it felt like the right partner, the right capabilities, creating a really substantial private bank and wealth management to complement the #1 business bank we have. In terms of the broader picture on AI and Wealth Management, that's been on our minds for banking. It's been on our eyes -- it's obviously been on our minds in the context of Wealth as we thought about the Wealth space over the last couple of years. I actually think the winners in the Wealth space in respect of AI will be those who have scale and have data. When you think about 20 million customers that NatWest has, that's 200x the times of Evelyn. So the ability to use that scale and data, I think AI is a big accelerant and opportunity. Secondly, what all the customer research and customer insight tells us, both independent and our own is that the winning combination is going to be a combination of I guess, AI-driven digital wealth advice, but also expertise through humans and people for those big financial decisions, the complex aspects of financial planning. So to me, you bring both together, you see AI really helping us get closer to our existing customers in the wealth space, which is great, but also access new customers at relatively low marginal cost. But then combined from a hybrid perspective with excellent advisers for the more complex financial needs. So that's how we think about it. So we have -- net-net, we think AI will be an accelerant and a winner and will be a winner in terms of our wealth aspirations. And we think the customer need is really this hybrid need. And then more generally on AI, I mean, it's already affecting the sector. We've embraced it. That's from a colleague perspective and a customer perspective. I think it's going to change how customers engage with us or how they find us and discover us. I think what it plays to is, again, my point around scale. I think the winners here will be those who've got significant sized customer bases, 20 million for us, a long-standing relationships data. So you can bring products, propositions whether directly to your own channels or through other channels. I think that is going to be successful. And we're very thoughtful about that in terms of how we're building our capabilities. I hope that gives you a quite a big picture on all those big topics. Thanks, Rob.

Our next question comes from Amit Goel of Mediobanca.

So the first question is just on the broader capital generation targets. So one is more -- well, part of it is just a clarification. When we talk about the circa 200 bps for 2026, I guess does that exclude the Basel 3.1 effect, which comes 1st of Jan '27, or is that in there? And more broadly, just looking at the 2028 capital generation target, greater than 200 bps, just curious, it seems to be on the low side, especially if I think about the kind of RoTE target, greater than 18%. So just if you can talk to your ability to meet or beat or how you reconcile to? And then just the second question, just a shorter follow-up. But, when we talk about the circa 13%, CET1 target going forward, is that a level where you'd be happy to operate one quarter or the other quarter with 12% kind of handle starting point? Or is it basically you'll look to be at 13% plus throughout your kind of operating period on a quarterly basis?

Thanks, Amit. So let me knock 2 of them off pretty quickly. So on the cap generation, yes, it excludes the 1st Jan '27 increases from Basel 3. So hopefully, that gives you the clarity there. We've also said that we believe that will be around circa GBP 10 billion. So x is the answer there. On the third question or the kind of sub question on CET1 and 13%, obviously, we've been thinking about that for a couple of years. It's around 13%. So the way I would think about it is it's not a hard floor. So that's the way to think about it. And then on the broader question of '28 and capital generation. A couple of things. One is, it's important to remember it's on a growing balance sheet, so it includes the growth that we've talked about. So please bear that in mind. And I guess just a bit of context. Obviously, you can see 19% RoTE this year. You can see the capital generation at above 250 basis points. That's our third year of greater than 17% RoTE. It's on a balance sheet that continues to grow to the compound rate, and you need to bear that in mind when you think about capital generation going forward. And that obviously flows through to EPS, DPS and higher TNAV per share. So that's how I would think about that. And as ever, we're very clear. Our target is you can see how we position our targets. The intention for '28 is to be greater than 200 basis points. Hopefully, it gives you a good picture.

Our next question comes from Christopher Cant of Autonomous.

If I could ask one on RWAs, please. So really pleasing to hear the detail around how you're expecting to grow. I think that's an important part of the story. But obviously, you're now talking about this CAL concept for growth, which makes it quite hard for us to think about the capital intensity of growth. Obviously, capital intensity of AUMA or deposits within that number quite different to lending growth given us this new guide on the Basel 4 RWA impact, which I think is probably a bit above where consensus was. So if I could just invite you to comment on the consensus RWA expectations. I think we're at GBP 223 billion in 2028. That would be appreciated just so we can sort of understand how you're thinking about the RWA piece of the puzzle? And then on rates assumptions, please. Your base rate assumption is 3.25% flat, Fair enough as a planning assumption. Could I just understand what reinvestment rates you're assuming on the hedge within those gross income increments you've given us, given the flat base rate assumption, I assume you're assuming a fairly lift swaps curve or a reasonably low reinvestment rate?

Very clear, Chris. Thanks, Katie.

Sure. Thanks very much. So if I deal first of all, you kind RWA outlook kind of point. I guess, as we look ahead, 2026 has obviously been underpinned by the disciplined balance sheet growth that we've got, the increasing regulatory clarity as well as the kind of further active kind of management, but the primary driver will be the lending growth. One of the slides we have included in the appendix pack is, I think, on Slide 57, a bit of a detail on risk density to show you that the risk density of lending is stable. However, the volume will increase. So therefore, your volume of RWAs will follow through in that. And so you need to kind of bear that in mind as you go through. There could still be a couple of small additional impacts from CRD IV in 2026, we think that's largely done. But obviously, our models are in that final stage of the PRA and there can be a little bit of movement as you get them kind of finalized. I would also expect to see some further RWA management. I would say we've had a really stellar year this year on RWA management, so I wouldn't necessarily put that number into your model at quite that kind of high level, but it's something you will continue to see as we move forward from here. And then if I go to the hedge and in terms of that kind of reinvestment yield that we see, look, as you know, we talk a lot about the tailwind that's coming through on the hedge. And if I look at our current economic assumptions, there's in the -- of the 5-year average of reinvestment rates, 3.5% in terms of the product hedge and the 10-year gilt reinvestment rate of 4.5% over the next 5 years. So we do expect that hedge to deliver on an annual year-on-year tailwind into 2030. The second thing you need to think about as well is not just those rates, but also the size of the hedge. We are assuming an increasing notional balance coming through. So we're GBP 190 billion in 2025. We expect that to grow to GBP 200 billion in 2026. And then I expect it to grow steadily as we move forward to 2030, supported by that CAL growth. Obviously, some of that will be going into the hedge eligible deposits and others will be into the increasing size of the equity hedge. Chris, if you were starting with me to probably say, those rates feel a little bit low. If I were to mark them today, they'd be a little bit higher, That's a fair statement, and I kind of accept that. However, I, kind of sitting where we are today, am comfortable with the rates for our base assumption. We'll see that as it comes through. But overall, we are really confident of this tailwind that we see coming through on the hedge in the next couple of years, but also all the way out to 2030. Thanks very much, Chris.

Our next question comes from James Invine of Rothschild & Co Redburn.

I've got a couple, please. The first is on the guidance. I mean, if we -- sorry, the revenue guidance that is. So if we start with your GBP 16.4 billion revenue that you printed for last year, you guided to the hedge being an extra GBP 1.5 billion, so we're up to GBP 17.9 billion. There's decent balance sheet growth. So that's another tailwind for that. I know you've talked about Bank of England rate cuts. But I think from what I can see, the second one only comes right at the end of the year. So I was just wondering what are the headwinds you've got kind of factored into the 2026 revenue growth, please? And then the second one is just on costs. So Paul, I think on one of your slides, you talked about doubling the number of coders to 12,000, but also the AI is now writing about 1/3 of their code. So from here, what are you expecting for where that number of coders needs to go? I can see reasons for why it might go up a lot, but also why it might come down a lot. So I'm just wondering what your view is, please?

Great. Thank you, James. Do you want to take income '26?

Yes, sure, let me kick off. Thanks, James. So as we look at that kind of guidance, GBP 17.2 billion to GBP 17.6 billion, we're very confident on it. We will deliver in that range. And if you look at it, what we will be delivering as a kind of 5% to 7% top line growth. So very good. Let me help you a little bit with your math. And there's a couple of things in there. First of all, and the most important thing in reality is customer activity. And where we kind of land in that range is going to be very dependent upon that kind of activity, I would say. But we have a strong multiyear track record of growth. You can see the growth that we're talking about this morning, what we've delivered in 2025, we would expect that to continue as we move into 2026. So, obviously, the mix will ultimately contribute into the income contribution. You're aware, we may talk about it more this morning as well, a little bit of pressure that there is on mortgage margins at the moment. We talked about that in Q3. And there's also some continuing competitive pricing going on in the savings products. The second bit is on rates. 2 rate cuts, they're actually penciled in my forecast in April and October. So Q2 and Q4 as they come through. So they will have a little bit of an impact. However, I think you've also got to remember that we're not at the start of the rate cutting journey. We're quite some way through it. So if you think of our sensitivity, we give you, we give you year 1, we give a year 2 and year 3. The way I think about that number, it's a kind of negative GBP 500 million against that positive of the hedge coming through because you've just got the cumulative effect of those rates coming through. So I would bring that in. And the third thing I would think about -- you heard me talk already about the RWA management action. They do come at a cost. And as I look into 2026 numbers, I would say the cost -- additional cost of the RWA actions that we've done would be an extra kind of GBP 100 million as well. So I would take that off. And that will get you very nicely into the range that we're talking to you about the GBP 17.2 billion to GBP 17.6 billion and it's -- we're very confident that we're going to be able to deliver that. So thanks, James. Hopefully, that helps. Paul, so I hand back to you.

Thanks, Katie. Shifting gear to quite a different topic. I guess, engineering and productivity of software engineering, James, is something we spend a lot of time on as a management team. It's definitely a topic du jour. And it's pretty obvious the AI developments have been transformational for us. All our engineering and coding teams have got access to AI tools. As you alluded to, we have around 12,000 engineers and that's been increasing over a number of years. But now we're at a situation where circa 35% of the code is written by AI. So I think over time, there will be choices around how you use that capacity. I think it's still an evolving picture. We've got a couple of quite exciting pilots running in 2 of our businesses in our international business and also in our financial crime area, where we're, I guess, what we call doing fully agentic press play software, and that's actually delivering 10x productivity gains. So that's where you've got agentic workflows, autonomous agents, their planning, building code, testing code, but obviously then overseen in a responsible way by human. So this space is, I think, exploding pretty quickly. And I think it's inevitable there'll be a change both in the profile of, let's call it, engineers in terms of the activities that they do. And then I think there'll be some choices about how you capture that productivity benefit to capture some of it to go faster, deliver more products and services to your clients and enhance the customer proposition. Or do you also see opportunities for -- we also see opportunities for productivity and efficiency. And I think all of the things being equal, that's a reasonable expectation over the short to medium term, that there'll be some productivity and efficiency opportunities moving forward. Hopefully, that gives you a flavor for it. But very excited by the work that's going on there. But we are very mindful that we're a regulated industry, and we're doing it in a very responsible and thoughtful way. Thanks, James.

Our next question comes from Aman Rakkar of Barclays.

I had a question actually back on Evelyn. So, yes, I guess the market reaction to Evelyn has been what it is and coming in the backdrop of broader cross currents. But the feedback I've been getting is around potential execution risk around the deal. So I was kind of interested in your take around your comfortability, your confidence in your ability to kind of integrate this business and also extract value from it. If you could bring a bit more to life around perhaps the revenue synergy that the degree of confidence that you have that in 2 years' time will give me looking back and think there's a good deal. And the kind of related question is a repeat of a question from earlier this week. But could you -- can you help us with your assumptions around attrition? I think that is essentially a key unknown variable here. How are you thinking about attrition risk in the investment practitioners? And what kind of strategic actions are you going to have to take to ensure that your staff, but also your customers kind of don't leave. If you could help us with that, I think it would really help.

Great. Thank you, Aman. So let's start with integration. And then I'll come on to revenue synergies, and then we'll talk a little bit around, I guess, the value creation and ensuring we retain both critical people, but also customers. On integration, very high confidence, Aman. We've known the business and tracked the business for a number of years. We know people -- obviously, we know people in the business. So we know Evelyn very well. We've undertook quite extensive due diligence around it, whether that's the tech platforms, whether that's the cultural alignment. There's been a lot of investment since the, I guess, original combination of the business in 2020 into the tech capabilities. We've seen that, to all intents and purposes, the tech end of integration is complete. The benefits of those investments are actually now coming through for Evelyn. There's a lot of congruence and alignment between the underlying platforms that our acute business uses and Evelyn uses, that gives us confidence about we know the platforms, we know the systems. We have experts on both sides of the transaction who know those platforms and systems. So we feel very confident about that. And what we also have on both sides of this transaction, we have experienced people who have done M&A transactions and integrations. We've got our very recent experience and the team still on the park around the Sainsbury's acquisition. We've complemented that over the course of the last 12 months with individuals who've been involved in some really significant FS M&A activity over the course of the last 12 months. Obviously, given Evelyn's history, they've built experience there as well, having to integrate different businesses. So we feel we feel pretty confident around that, what I call that alignment around integration and the ability net-net to create a lot of value out of that. So that's integration, high conviction, high confidence. On revenue synergies, I guess we could talk a long time about that. Big picture, though, I think the really critical thing to remember here is there's a really big opportunity in helping a lot more people to save and invest for the future. We've got these regulatory tailwinds, which you know about the financial advice gap. And we also know that in the wealth industry, despite the historic kind of cautious investment culture, we've seen mid- to high single-digit growth in AUM. If you look at our own business, we've seen 12% compound growth in assets under management. If you look at our 2025 performance, 20% growth in AUMA, net new money of 8.4%. So that's the big picture that gives us, I guess, a sense of confidence. If you look at the drivers of income growth, you look at Evelyn's track record, over 7% since 2023 in terms of AUMA growth. And then on top of that, we've got the revenue synergies. So where do they come from? Three big opportunities, BestInvest, it's a really significant upgrade to our NatWest Invest digital platform. We have the opportunity to bring that to life for our 1.2 million premier customers and our 19 million, 20 million customers in Retail. The breadth of the BestInvest offering versus our current offering is incomparable. At the moment, NatWest Invest has 5 funds. We've got 3,000 products with BestInvest, 19 funds versus 5 funds, access to U.S. equities, U.K. equities, ETFs, investment trusts plus we have a relationship with those 19 million customers and the ability to surface these opportunities through the app. So that's the first big kind of, I'd say, opportunity. Then you look at the excellence that Evelyn has in terms -- and the scale it has in terms of financial planning and the biggest adviser -- employed adviser network in the country. Again, we can bring that to our 1.2 million premier customers. We can bring that to our high net worth customers in Coutts. Again, the breadth of the proposition really adds to, I guess, the wealth water front that we have in our Coutts business, and 2x in terms of our Premier business. And then the third synergy is, obviously, if you look at what Coutts size, you look what NatWest has, we have a range of banking products, lending and banking that we can bring and support Evelyn clients with. So, you don't have to make very -- when you work it through, as I'm sure you have a month. You don't have to make very big assumptions to see where the opportunities are, both in the underlying growth rate of the business but also in the revenue synergies and opportunities that there are, and that's why we're very high conviction on this from a strategic perspective and very high conviction that the value creation in both the short term and long term will be significant. Thanks, Aman.

Our next question comes from Jonathan Pierce of Jefferies.

Two questions, please. Apologies if I missed an answer on this already. I had a few issues this morning. The first is on tangible equity. Really looking at consensus out to 2028. There's lots of moving parts I guess, here versus what consensus might have been thinking before. So Evelyn sit down, lack of buybacks, push it back up, you're now talking about a bit more growth than people had in. The GBP 33.4 billion of average tangible equity consensus has in '28. How are you thinking about that? Is that an appropriate number to be applying the greater than 18% to? Or could that be a bit higher than that? That's the first question. The second question is on the hedge. Can I just confirm and I heard correctly on the equity hedge that you're now showing the income from the equity hedge as though it was invested in 10-year gilts rather than 10-year swaps. Is that obviously is going to give you a better yield and a better tailwind than if it was swaps. And you've obviously dropped the disclosure on the maturity yield on the product hedge. Just want to get a sense as to what that is in 2028, please, because obviously, the notional is growing, that all else equaled that the hedge income is going to grow, but I'm not sure that is a sort of underlying feature. What's the maturity yields, please, on the product hedge in 2028?

Thanks, Jonathan. Katie?

Sure. Thanks very much, Jonathan. So as we look, first of all, at the kind of the TNAV question, I think it's been -- it's important to look at the kind of T, the Evelyn versus share buyback and things of that, even with the capital allocation conversation as far as we're talking about in terms of TNAV. So it actually has no impact on your 2028 TNAV. And by that, I mean, if we haven't done Evelyn, we distributed the capital because our belief is to access your capital to you. So it was already out of that TNAV calculation. When you think of the TNAV, it's really CAL you've got to think about and within there, obviously specifically loan growth. There's a little bit of unwind of the cash flow hedge. But if you think of our loan growth that we've done over the last number of years, we're always -- we've been consistently above 4% within there. I could use that as a good proxy for TNAV if I were you. So therefore, I would say as I look at my number versus your number, I try not to compare myself to consensus, I would probably guide you to that 4% a little bit and kind of lift up a little bit as you go through. I know you're absolutely right as well if I move on to the hedge. We have over this last -- well, as we look as part of our kind of management of the hedge to sort of say where our opportunities. And so we have moved some of our equity hedge into gilts and because we felt we were getting a better return there and we can absolutely see that return coming through in terms of the extra GBP 50 million that we report within there. The equity hedge is GBP 25 billion in size. It's not by any means all in gilt, something we've just started to do relatively recently. And -- but we'll continue to -- we expect to continue that move as we see the kind of gilt return being a bit better than the swap return. We're not particularly constrained on the size of that. I would discourage you from saying, although start to do that on the credit hedge, the product hedge we won't just because it's a very different beast. We've got a lot of natural kind of product offset that we see within there, but it definitely is helpful to us in terms of that delivery. And Jonathan, I'm going to disappoint you a little bit and not give you the numbers, I've chosen not to disclose this morning. But you can sort of see that what we have given you is that combined yield. We've also given you the numbers as we go through. I know that one of the questions that has been going around is around actually that redemption yield and what it looks like specifically in 2028. So if I look at the kind of 2028 redemption yield for the structural hedge, it is slightly below 4%. Currently, we do see '28 as a kind of peak and it's always a favorite analyst term, the kind of peak redemption yield level, but we see that falling then into '29 and '30. I would say it's the only year that we do see the redemption yield being above our reinvestment yield. And the difference is probably 30 to 40 bps on that number. However, I think really importantly, there is a reason that we don't worry about this. It's more than offset by the compounding benefit of the hedge reinvestment over 2026 and 2027 and of course, the expected increase in our hedge nominal over the period, again, in line with our CAL guidance. And that's just why we are really comfortable about this annual income tailwind that we see through to 2030. I hope that helps you without giving you the exact numbers you're maybe searching for.

Our next question comes from Guy Stebbings from BNP Paribas.

The first one was going back to the income guide for '26, but refocusing on net interest income. I mean, I appreciate you don't split out the guidance as such. But if we think about noninterest income perhaps broadly similar to '25, maybe a bit of growth as per consensus sort of ballpark 3.6%, then it looks like you're thinking about an NII around GBP 13.6 billion to GBP 13.9 billion. Q4, you're already sort of annualizing within that range. So I just want to check, is that the right way to think about it, and you're not really anticipating a lot of NII growth versus the Q4 annualized run rate and the rate cuts, I guess, lost NII from SRTs or mortgage return could almost be offset the hedge and volume growth, still a touch conservative. I just want to check my thinking there. And then on rate sensitivity. You're now talking to an increase to GBP 157 million on the managed margin sensitivity. I think that's 30% to 60% deposit pass-through. I appreciate the capacity reasons, you're not going to say exactly what you're assuming in the future, but maybe you can talk about how that's trended in particular in terms of the December rate cut. And I'm not sure, Katie, you mentioned something about a buildup of rate sensitivity as time progresses. I wasn't sure if that was sort of related to this point or something else. So perhaps you could elaborate.

If I miss any of them, Guy, do come back and forgive me. So I guess, as we look at the income guide, first -- my first guidance would be, and you've heard say before try to look at the 3 businesses. You remember that in the center, we've had a lot of sort of movement between noninterest income and NII. And that kind of -- if you just take the total NII that does kind of confused it a little bit. We talked a little bit about Q3 that we put in some hedge accounting to help resolve that. And what you will see as we go through the next few quarters as you won't see those big flips kind of going from NII to non-NII which is why I would say, really look at the 3 businesses. We are confident on the momentum that we see in the underlying customer activity and the underlying momentum we have in the business. But we would not -- we would expect to see noninterest income across the 3 businesses growing into 2026 from here as well. If I look then to the rate sensitivity, we've issued new ones today. The change in the amount is very much reflective of the sort of the size of the balance sheet as well. We work on a 60% pass-through. I would say broadly, when you look across a number of rate cuts, we're definitely -- we're in that sort of space as we come through from there. So that's not particularly changed. And I think that's a good proxy for you to continue to work on. And then I think your last point was very much around the income, and you've got this -- what's happening on the rate sensitivity. So if you look to 2026 income, what we've got is the impact of the rate cuts that we had in 2025, you will now have a full annual impact of those. And then I've also got 2 rate cuts in 2026. April, October, as I said earlier, when I look at those and kind of do my kind of math on them, I kind of see them as a drag of GBP 500 million, against the kind of income numbers that we've got through there. Obviously, going against the hedge, which is adding GBP 1.5 billion. So still strong growth, but that's why we're talking about in that part. It wasn't specifically on pass-through and things like that or our traditional rate sensitivity disclosure. Hope that helps. And I think I got all.

Hopefully we captured everything there, Guy.

Our last question today comes from Ed Firth from KBW.

I had two questions. One was on detail. You mentioned that one of the reasons for the, I guess, reasonably cautious income expectations from '26 was the cost of capital actions. I'm just wondering if you could give us roughly some idea of what quantum you're assuming that, because obviously that was a big driver of risk-weighted assets from '25 would be helpful. And to get a guide for '26 if that would be helpful. And then I guess the second question was, you are interacting with a lot of banks, when we look at up in your AI slides and the tech slides and lot to talk about 10x productivity and massive production of that. And yet, when I look at the cost expectations for the sector as a whole, the actual efficiency improvements in terms of cost to loans, cost of risk weight now barely moved in the last 4 or 5 years. And expectations are to be barely moving going forward as well, a few basis points here and there. And so I mean, are we going to get this to a quantum shift in the cost of delivering banking that we're talking? And I mean not just like inflation above like in theory, the unit cost of delivery in banking products should go down massively with a digital delivery. And yes, we don't ever seem to be seeing -- and so I'm just wondering, you're thinking, is there a time like post '28 where we can suddenly see this transformation? Or do we have to accept -- but actually, you're just replacing cheap brand staff with expensive software engineers.

Can I take the first?

Do you want take -- Katie, quickly do income, and then I'll give my thesis on efficiency.

Yes, thanks, Paul. So you'd expect me to say this, I would say to you that our 2026 income guidance is certainly very reasonable and not cautious. I think I've given you the maths and all the building blocks as to how you can see that. In terms of the specific question on the cost of the capital actions, what I said earlier is you should think in your model of a negative GBP 100 million in 2026 in terms of that additional cost. They make great sense to do. You can see that we actually, in effect, paid for all of our lending with those capital actions, and that's taking off lower performing capital and replacing it with higher performing. So we're really pleased with the performance of the business on that piece. But think of it as an additional GBP 100 million. And Paul, would you like to...

Sorry. Katie, in terms of risk-weighted assets, what sort of reduction do you get to that GBP 100 million?

So in terms of that, so I think the numbers that it's GBP 10.9 billion was what we took off this year. I'm struggling to remember the number from the previous year, but, I think it was around GBP 7 billion. And that's the kind of level that we've seen. What you -- those are multiyear transactions. So some of that risk-weighted assets started to roll into 2026. Obviously, there's a little bit of unwind within the year, and then we'll do some further transactions in the year as well.

Thanks, Katie. And then, Ed, on your -- I guess, your question around, I guess, unit cost of our assets that as different to or versus cost income ratio. That's actually that's because of management team we spend time on because we do think that's a very valuable and useful ends. I think the -- you can see by the numbers we've shared today. The cost income ratio has come down -- part of that is income going up. But the reality is the absolute cost base has gone up a little bit, well below inflation, well below wage inflation. The targets we've set out imply less than 45%. That makes us the most efficient large U.K. bank. So by definition, our expectations are that costs will continue to be continue to be well managed. And I've signaled today. I think Katie said it as well, and we see opportunity beyond '28 to go beyond that. I do think that genuinely is a significant change going on, where you can see a business model and operating model that operates at a much lower cost base with a higher income base that drives obviously with greater returns on equity, but also, we'll start to see the unit cost over assets because you've got the growth coming through reduced as well. Time will tell where that plays out. But I think what we've laid out today. And I do believe we've got this flywheel of kind of cost efficiencies going well. Time will tell, but I do think we've got very good momentum in terms of improving the underlying kind of unit cost base of the bank. So as you say, I mean we'll get there, but that's how I think about it. We use both lenses. Thanks, Ed.

Thank you for your questions today. I will now like to hand back to Paul for closing comments.

Yes, that seems to go quickly. So thank you, everybody, for joining us for the second time this week. As you've heard, we've delivered a very strong performance in 2025, continuing our track record of growth on both sides of the balance sheet and fees. Very attractive returns for shareholders. Our total distributions for the year were GBP 4.1 billion. That includes the GBP 750 million share buyback we announced on Monday alongside the acquisition of Evelyn Partners. That creates the U.K.'s leading private bank and wealth manager, we're very excited by that because it gives us another growth engine for the group. So hopefully, you've seen from today's numbers, we're ambitious for the business. We've set out new targets and we're determined to deliver returns greater than 18% in 2028. Thank you. Have a good weekend.

That concludes today's presentation. Thank you for your participation. You may now disconnect.

Good morning, and welcome to the NatWest Group Q3 Results 2025 Management Presentation. Today's presentation will be hosted by CEO, Paul Thwaite; and CFO, Katie Murray. After the presentation, we will take questions.

Good morning, and thanks for joining us today. I'll start with a short introduction before I hand over to Katie to take you through the numbers. We have delivered another strong quarter as we continue to execute on our priorities of disciplined growth, bank wide simplification, together with managing our balance sheet and risk well. Though inflation is above the Bank of England's 2% target, the economy is growing, unemployment is low, wage growth is above the rate of inflation and businesses and households have relatively high levels of savings and liquidity. This is reflected in the levels of customer activity we're seeing across the bank. So let me start with the headlines for the first 9 months. Lending has grown 4.4% since the year-end to GBP 388 billion, in line with our annual growth rate of more than 4% over the past 6 years. Growth has been broad-based across our 3 businesses and we attracted a further 70,000 new customers in the quarter. Mortgage lending was up by more than GBP 5 billion for the first 9 months as we broadened our customer proposition with new offers for first-time buyers and family backed mortgages, and issued mortgages to landlords in collaboration with buy-to-let specialists, [indiscernible]. Unsecured lending grew GBP 2.9 billion or 17.3%, and we made good progress integrating our recently acquired Sainsbury's customers. They're now able to view their credit card, link their Nectar card and view their Nectar points from credit card spending via the NatWest app. In commercial and institutional, we delivered lending growth of GBP 7.9 billion or 5.5% across both our large corporate and institutional and commercial mid-market businesses. in areas such as infrastructure, social housing and sustainable finance. As the #1 lender to infrastructure, we are supporting many large-scale programs up and down the country. And we have delivered GBP 7.6 billion towards our 2030 group climate and transition finance target of GBP 200 billion announced in July. Deposits grew 0.8% to GBP 435 billion as we balance volume with value in a competitive market and as customers manage their savings across cash deposits and investments. And there's more customers across the bank chose to invest with us assets under management and administration have grown 14.5% to GBP 56 billion. This has contributed to growth in noninterest income, along with higher fees from payments, cards and good performance in our currencies and capital markets business. This customer activity has resulted in a strong financial performance. Income grew to GBP 12.1 billion, 12.5% higher than the first 9 months last year. Costs were up 2.5% at GBP 5.9 billion resulting in operating profit of GBP 5.8 billion and attributable profit of GBP 4.1 billion. Our return on tangible equity was 19.5%. Given the strength of our performance, we are revising our full year guidance for income to around GBP 16.3 billion and for returns to greater than 18%. We continue to make good progress on both simplification and capital management. We have reduced the cost/income ratio by 5 percentage points to 47.8%. And and we generated 202 basis points of capital for the 9 months and ended the third quarter with a CET1 ratio of 14.2%. This strong capital generation allows us not just to support customers but to invest in the business and deliver attractive returns to shareholders. As you know, we announced a new share buyback of GBP 750 million at the half year, of which 50% has now been carried out. and we expect to complete the buyback by our full year results. Earnings per share have grown 32.4% year-on-year and TNAV per share is at 14.6% at 362p. So a strong performance for the first 9 months. I'll hand over to Katie to take you through the numbers for the third quarter.

Thank you, Paul. I'll talk about the third quarter using the second quarter as a comparator. Income, excluding all notable items, was up 3.9% at GBP 4.2 billion. Total income was up 8.2%, including GBP 166 million of notable income items. Operating expenses were 2.1% more at [indiscernible] due to lower litigation and conduct charges. And the impairment charge was GBP 153 million or 15 basis points of loans. Taken together, this delivered operating profit before tax of GBP 2.2 billion for the quarter and profit attributable to ordinary shareholders of GBP 1.6 billion. Our return on tangible equity was 22.3%. Turning now to income. Overall income, excluding notable items, grew 3.9% to GBP 4.2 billion. Across our 3 businesses, income increased by 2.5% or GBP 101 million. Net interest income grew 3% or GBP 94 million to GBP 3.3 billion. This was driven by further lending growth and margin expansion as tailwinds from the structural hedge and the benefit from the Sainsbury's portfolios for a full quarter more than offset the impact of the base rate cut in August. Net interest margin was up 9 basis points to 237, mainly due to deposit margin expansion and funding and other treasury activity. Noninterest income across the 3 businesses was up 0.8% compared with a strong second quarter. This was due to increased card fees in retail banking, higher investment management fees in private banking and wealth management. and a good performance in currencies and capital markets with heightened volatility. Given continued positive momentum and a clearer line of sight to the year-end, we have refined our income guidance and now expect full year total income, excluding notable items, to be around GBP 16.3 billion. We continue to assume 1 further base rate cut this year with rates reaching 3.75% by the year-end. This improved guidance alongside strong Q3 returns means we now expect return on tangible equity for the full year to be greater than 18%. Moving now to lending, where we have delivered another strong quarter of growth. Gross loans to customers across our 3 businesses increased by GBP 4.4 billion to GBP 388. 1 billion. with growth well balanced between personal and corporate customers across retail banking and private banking and wealth management, mortgage balance grew by GBP 1.7 billion, and our stock share remained stable at 12.6%. Unsecured balances increased by a further GBP 100 million, mainly in credit cards. In commercial and institutional, gross customer loans, excluding government schemes were up by GBP 3 billion. This includes GBP 1.6 billion across our commercial mid-market customers, in particular, in project finance, social housing and residential, commercial real estate as well as GBP 1.5 billion in corporate and institutions, mainly driven by infrastructure and funds lending. I'll now turn to deposits. These were broadly stable across our 3 businesses at GBP 435 billion. Retail banking deposit balances were down GBP 0.8 billion, with growth of GBP 0.6 billion in current accounts, more than offset by lower fixed-term saving balances following large maturities. Private banking balances that reduced by GBP 0.7 billion with flows into investments as customers diversify and manage their savings as well as tax payments made in July. We saw a small increase in commercial and institutional of GBP 0.4 billion, with higher balances in both commercial, mid-market and business banking. Deposit mix across the 3 businesses were broadly stable. Turning now to costs. We are pleased with our delivery of savings this year, which allows us to invest and accelerate our program of bank-wide simplification. Costs grew 1% to GBP 2 billion, including GBP 34 million of our guided onetime integration costs. This brings integration costs for the first 9 months to GBP 68 million. We remain on track for other operating expenses to be around GBP 8 billion for the full year. plus around GBP 100 million of onetime integration costs. This means you should expect expenses to be higher in the fourth quarter, driven by the annual bank levy and the timing of investment spend. I'd like to turn now to impairments. Our prime loan book is well diversified and continues to perform well. We are reporting a net impairment charge of GBP 153 million for the third quarter. equivalent to 15 basis points of loans on an annualized basis. Our post model adjustments for economic uncertainty of GBP 233 million are broadly unchanged. And following our usual review, our economic assumptions also remain unchanged. Overall, we are comfortable with our provisions and coverage, and we have no significant concerns about the credit portfolio at this time. Given the current performance of the book and the 17 basis points of impairments year-to-date, we continue to expect a lower impairment rate below 20 basis points for the full year. Turning now to capital. We ended the third quarter with a common equity Tier 1 ratio of 14.2%, up 60 basis points on the second. We generated 101 basis points of capital before distributions, taking the 9-month total to 202 basis points. Strong third quarter earnings added 84 basis points and the reduction in risk-weighted assets contributed another 8 basis points. Risk-weighted assets decreased by GBP 1 billion to GBP 189.1 billion. GBP 0.9 billion of business movements which broadly reflects our lending growth and GBP 0.3 billion from CRD 4 model inflation were more than offset by a GBP 2.2 billion reduction as a result of RWA management. This brings our CET1 ratio before distributions to 14.6%. We accrued 50% of attributable profits for the ordinary dividend as usual, equivalent to 42 basis points of capital. We continue to expect RWAs of GBP 190 billion to GBP 195 billion at the year-end, with a greater impact from CRD4 expected in the fourth quarter. Turning now to guidance for 2025. We now expect income excluding notable items, to be around GBP 16.3 billion and return on tangible equity to be greater than 18%. Our cost impairment and RWA guidance remains unchanged. And with that, I'll hand back to Paul. Thank you.

Thank you, Katie. So to conclude, we're pleased to report another very strong quarter of income growth, profits, returns and capital generation. This has been driven by customer activity across all 3 of our businesses, leading to strong broad-based lending growth and robust fee income. Our continued focus on cost discipline has delivered meaningful operating leverage. And as we actively manage both our balance sheet and risk, the business remains well positioned to deliver strong shareholder returns. As you've heard, we have upgraded our full year income and returns guidance today. And we'll update you on our guidance for 2026 and share our new targets for 2028 at the full year in February. Many thanks. We'll now open it up for questions.

[Operator Instructions] Our first question comes from Benjamin Caven-Roberts of Goldman Sachs.

So 2 for me, please. First on deposits and second, on noninterest income. So on deposits, could you talk a bit about deposit momentum in the business? And in particular, you mentioned the retail fixed term outflows over the quarter. Could you talk a bit more about how much of that is reflecting conscious pricing decisions? And then looking ahead, the sort of trajectory for deposits going forward? And then on noninterest income, very strong even when adjusting out the notable items related to derivatives. Could you talk about momentum in that franchise and what business drivers you're particularly focused on looking ahead?

Thanks, Ben. Good to hear from you. So let's take them 1 by one. So on deposits, so big picture is up around GBP 3.5 billion, around 1% year-to-date. Different stories within the different businesses. I guess, we talked at the half year around the kind of ISA season and some of the -- get the confluence of debate around the future of ISA and how that led and some of the movements in the swap curves on the back of tariffs and how that led to different pricing. That period is behind us. There's been more normalized pricing since the kind of April, May. If you look at our 3 businesses, I'd say slightly different trends. I'll finish with retail because there's more to unpack there. On the commercial side, deposits are up, encouragingly, that's in kind of the business bank and commercial mid-market. That's good. Private bank cash deposits are down. A combination of things, July, we saw some tax payments -- but also we see more funds shift from cash deposits into securities and investments, which is a net positive trend. In retail, if you look at current account balances, they are up. So kind of operational balances, salary accounts, you can see that the numbers are up there. I think the details are in the disclosures. Instant Access is flat. -- where we've seen some reductions is in fixed term accounts. And that reflects a number of mature -- large maturities that we had during the quarter. We're pleased with our retention rates. They're running about 80%, 85%. But as you alluded to, given our LDR at 88%, LCR at 148% we're finding a right balance between value and volume. So we've been pretty dynamic, and we're focusing on where we see funding and customer value. So that's that's unpacking the deposit story for you. So different stories in different businesses, relatively stable given our overall funding profile, very focused on managing appropriately for value. On the second question, which is non-NII, yes, as you alluded to, we're pleased with the quarter, and we're pleased with the year-to-date. Good momentum in the areas that we've been focusing on. I mean it's quite broad-based actually, when you unpack it, cards, payments, but obviously good contribution within C&I from our markets business driven by the strong FX franchise and by the capital markets business. So we've had a strong quarter 3 there, probably slightly stronger than we expected when we spoke to you at the half year. We feel as if our focus on those areas, whether it's the market part of commercial institutional, whether it's our payments business. But also, as you can see in our wealth business, the fees from assets under management are increasing as well. So it feels like we've got good progress and good momentum on fees and it remains a strategic area of focus for us. Thanks, Ben.

Our next question comes from Sheel Shah of JPMorgan.

Great. Firstly, on the costs. You've reiterated your cost guidance for the year despite the strong third quarter performance. How should we think about cost growth going forward, given we have CPI going back towards 4%. You're clearly simplifying the bank internally. Do you think a 3% cost growth number is the right level for the bank? Or do you think that maybe understates your ability to manage the cost base? And then secondly, on capital, could you give us a steer on the CRD impact that we expect for the fourth quarter? And maybe thinking about the fourth quarter capital level, how are you thinking about operating in that 13% to 14% range? Is there anything preventing you from moving down towards the 13%? Or are you managing maybe for M&A or anything else maybe in the horizon that you're thinking about? Because this is clearly the strongest capital print we've had for the last maybe 3, 4 years or maybe 2 to 3 years for the bank overall.

Thanks, Sheel. Katie, I'll take the cost and then turn it over to you on the capital piece of that okay.

Yes.

On cost, Sheel, so as you say, it's a -- it's a strong year-to-date picture if you look at year-on-year comparisons. And obviously, we have the one-off in terms of the integration costs as well of Sainsbury's. I am pleased with the momentum we're getting on the simplification agenda. I think that's -- you can see that starting to bear fruit. It's also I think most pleasingly, it's a bit of a flywheel because it creates investment capacity to drive further transformation in the business. And it's not only cost out it's also improving customer experience and colleague experience as well. So as you alluded to, we're holding with the current year guidance, GBP 8 billion plus the GBP 100 million of integration costs, but we are pleased with the momentum on the agenda -- on the simplification agenda. I'm not going to be drawn on kind of 26 costs or future costs. We'll talk to you in February around '26 guidance and new '28 targets. But what I would say thematically is we still have a very significant focus on cost management, and we're a very high conviction on the simplification agenda. And to help put that in context a little bit for you to deliver the cost print that we are doing this year requires us to take more than 4% out of the kind of the underlying business. so that we can support the investment, the inflation-related changes, be they wages or tech contracts. So we've got good momentum in kind of taking that, driving that efficiency out. been able to invest, but also delivering good cost control. So that's the ethos going forward. And the levers that we're pulling those levers can still be pulled moving forward, whether that's continued acceleration of our digitization, streamlizing and modernizing the tech estate. Just by way of example, we decommission 24 platforms in retail so far this year, which is great. You've seen we've done a lot of work simplifying our operating model, whether it's in our wealth business, moving some of the support areas in Switzerland to the U.K. and India rationalizing our European footprint, legal entity footprint. and just some of the good organizational health measures. So it feels as though those levers that we've been pulling can continue to be pulled -- and then obviously, you lay over that some of the productivity benefits we're seeing from AI and those activities around customer contact, software engineering. So net-net, I'm not giving you a number for '26, but hopefully giving you a sense of how we're thinking about it and where the momentum is coming from, and therefore, our confidence in maintaining a good healthy cost profile going forward. Katie?

Perfect. Sure. So Sheel, I'll just start off talking a little bit with CRD for the interest on capital as well. So look, as you look at it, you're absolutely right. In the quarter, limited CRD4 impact. We are expecting the majority of that in Q4 and a little bit of that may even bleed into 2026. So when you think of our kind of RWAs from here, it's very much about the loan growth, the management actions as well as that more material impact of CRD4 coming in, in the fourth quarter. And then going forward, you're familiar with Basel 3.1 coming in in 2026. That is always important to remember that comes with a bit of a Pillar 2 reduction when it comes through in terms of capital. But when I think of kind of the RWAs is to kind of think of the absolute growth that we're talking about in the book, importantly, the mix of that growth, but also the kind of risk density that you see once we pass the CRD for and the Basel 3.1. And of course, obviously, the continuing strength of our management action program that we have. And then if you turn to kind of capital, clearly, a really strong print today, very pleased with the 101 basis points we did in the third quarter, 202 bps for the first 9 months. I mean a great result by any measure. We've always said that we're happy to operate down to that 13%. We do think about capital generation and when we think of it in terms of dividends and where we're going to land and things like's that, we do debate the sort of next sort of 6, 12 months as well because you've got to think about we really try to manage a consistent program of capital return back to the market, but also it mindful of that RWA generation that's coming, whether it be from regulatory change or the growth the growth within the book. And so as you -- I would kind of as you consider where we might land and what we might think about is think on those various points. Thanks very much, Sheel.

Thanks Sheel.

Our next question comes from Aman Rakkar of Barclays.

I had 2 questions, please. I guess we're all probably singularly focused on 2026 at this stage. So particularly on income, love to kind of get your take on how we should think about the various drivers from here across I guess margin developments, clearly, loan growth continues to surprise positively, but any color you can provide on kind of the drivers of fee income from here would be really helpful. And I guess the second question was around your longer-term targets that hopefully you're going to present to the market in the new year. And to me, it looks like there is the underpinning of pretty decent operating leverage for a number of years here, not least because of the structural tailwind to '28 that you guys flagged. So I guess one for Paul really in terms of your view on structural operating leverage in your business on a multiyear view from here, how confident you are in that in terms of some of the levers you might want to pull -- and I guess, I'm ultimately interested in the RoTE output. For me, you're doing 18% this year, and there's no reason to think in my mind why you don't accrete quite nicely over and above that level as you realize that operating leverage. So any kind of color you can give on that basis would be really helpful.

Katie, do you want to take '26 and I'll talk about.

Perfect. That's great. Thanks, good to hear your voice. Look, we do continue to expect the income growth that we've seen throughout our guidance period, and we do remain confident in that growth trajectory beyond 2025. So as I look at 2026, there's probably a few things I would kind of guide you to. One, growth. I mean, we've talked about this a lot, but we've got a strong multiyear track record of growth across all 3 of our businesses. We outpaced the wider sector on that. if we look at the breadth of our business, we know that we're well placed to capture demand as it comes through, and we'll continue to deploy capital throughout 2026, and we do expect that growth to continue. Obviously, there's a mix of growth across both sides of the balance sheet, and that's very much a function of customer and competitor behavior. The hedge, I think you're all very familiar with the hedge these days. We've talked about it such a lot over this last year, but certainly, strong growth into 2026, over GBP 1 billion higher in absolute terms in 2025. I think that's well understood by all of you. Rate cuts, we do expect one further rate cut in Q1 after our plans still have a rate cut in November. So we get to a kind of terminal rate of 3.5%. And then you'll see the kind of averaging impact of the rates we've had this year coming through into 2026. Paul has already spoken on noninterest income and our confidence in that business, very much the strength of the kind of customer franchise, always dependent on customer volatility and -- sorry, customer activity and volatility, but it served us very well this year. But if I think of all of those trends together, Aman, they will continue beyond next year as well, obviously, with the exception of rate cuts as we believe we'll get to that terminal rate in 2026. But I'd agree with you, we feel quite well placed at the moment. Paul?

Thanks, Katie, and thanks, Aman. And yes, A, we've announced today that we'll share targets for '28 in February. So we've been very explicit on that. So we look forward to that session. But as you say, it's obvious we've got good momentum in the business, and that's predicated on strong operating leverage. If you look at today's numbers, we've got a 5% cost/income ratio improvement, and we've guided to over 9% jaws for the year. So a very strong proof point of the operating leverage that we've got in the current business model and business mix, which we have talked about previously. But as I said, I'm just very pleased that it's bearing fruit as the -- both the income growth and the simplification agenda comes through. as I said to Sheel's question, we are high conviction on the simplification agenda. The levers we are pulling are working, and we can see a path to continue to pull those levers, which should further support the operating leverage to link it to Katie's answer as we see the top line growth through the different aspects. It's our seventh year of growth above 4% on the lending side. So that gives us confidence there that we've got customer businesses that will capture demand and have grown above market growth levels over a multiyear track record. So that's what's going to inform our thinking as we go through. But the underlying thesis here is very tight management of costs that creates capacity to invest, growing the customer franchises, strong jaws, generates a lot of capital, over 100 basis points in the quarter, over 200 for the year, and that gives us confidence about the outlook. So hopefully, that gives you a sense how we're thinking about it. And obviously, we'll talk specific numbers in February. Thanks Aman.

Our next question comes from Alvaro Serrano from Morgan Stanley.

Hopefully, you can hear me okay. I guess the 2 bit follow-ups, but I'm interested. NatWest Markets continues to do very well and hold up very well. And I know there's a history there, and I suspect part of the cautious guidance has been on the limited visibility of the nature -- because of the nature of the business. But given it continues to perform pretty steadily, consensus has it down the contribution in 2026, and there's not a lot of growth medium term in noninterest income. Given the performance the last few years, can you sort of share your reflections on that business? How much is being cyclical versus what you changed in the business? And is that right to assume a normalization down medium term and next year in particular? And second, around loan growth, it continues to do very well. in corporate, I'm thinking now it was lumpy to start with in corporate and institutional, but it does look like it's much more spread out in mid-market now. Again, as we think about the next few quarters, how do you see that momentum? Should we think that this level of growth is sustainable?

Thanks, Alvaro. Katie, do you want to take the C&I kind of markets products question, and I'll take the wider lending.

Yes. No, absolutely. So I mean, Alvaro, it's interesting. Obviously, you've been with us for some time, and you've been on that journey in terms of NatWest Markets. And I think the real strategic important thing that kind of has happened really from the beginning of last year is actually the merging of C&I into into that kind of commercial and institutional business so that you have one team really delivering strategically for their customers. And we've really seen the benefit of that coming through. We've had very robust noninterest income. That -- there's been higher fee income coming through in payments and the strong performance from C&I is an important part of that. And it's really around the strategy that we've got of bringing more of the bank to more of our customers. And a result of that, we see -- we saw the strong demand for FX management and then really strong risk management as well against the backdrop of the volatile markets that was there. So really making sure that we were in place for our customers when they needed us in terms of the general kind of market activity. So I would say it is very much the outcome of that strategy of bringing that NatWest activity into the C&I franchise, making sure that we're there to deliver and meet the kind of customer activity as we go forward. And we would expect that to kind of continue from here. Volatility is a big part, of course. It's hard to call where that will land. Customer activity is critical, but we kind of -- we really do see that as a really strong basis going forward. I'd just remind you, as I often do on these calls, is when you're looking at noninterest income, it's always good to look at the 3 businesses. You do get a little bit of noise in the center as you move forward from here that will reduce a little bit as we go forward. But overall income outlook kind of is -- I think we're very pleased with it, and that's what's enabled us to upgrade our guidance for this year. And you've heard me talk around the confidence we have as we go into 2026 as well. Thanks, Alvaro. Paul?

Thanks, Katie. And Alvaro, I sense your question on lending was specifically around the commercial institutional business. And -- but just I think it's worth framing our, I guess, our lending growth and our lending opportunity more broadly before that. I say we've got a decent multiyear track record now of growing the 3 businesses. That's 7 years at above 4%. This year, it's currently running up GBP 16 billion. It's up 4.4%. So it's quite broad-based the growth. If you drop down into the commercial franchise, it's a good spot. The quarter 3 print and the growth of around GBP 3 billion is split between, I guess, the large corporates and the mid-market. It's pleasing to see the momentum in the commercial mid-market. You'll have heard me say before, I do think that's kind of a helpful proxy on the kind of wider U.K. environment. When you look at where the growth is coming from in the mid-market, -- you can see it in social housing. You can see it in certain parts of real estate. You can see it in parts of infrastructure. So again, it's quite broad-based. So lending as a total quantum, yes, strong, but the constituent businesses it's coming from is encouraging as well. Infrastructure is a big part of that. And what I'd say is I feel as if our commercial business is very well positioned to some of those bigger structural trends that we're seeing. So whether it is infrastructure, whether it's project finance, whether it's sort of the social housing agenda. So the kind of combination of the structural trends and the policy trends support those areas we are -- we have deep specialisms in and have had for quite a few years. So yes, encouraging, as you say. Thanks Alvaro.

Our next question comes from Chris Cant of Autonomous.

Can you hear me?

Yes, we can.

Okay. It's still got a little mute icon on the screen, so I was a bit concerned.

Crystal clear.

Just on loan growth, Paul, I mean, I think it's been an area where if I look at consensus, consensus has got 3% or less loan growth in over the next couple of years. It's been something that as a management team, you've typically been reluctant to sort of give an expectation on beyond saying you have a track record of growing quicker than the market. But as you think out to the next planning period, -- how are you thinking about that in absolute terms? I presume you have a view on how much growth you think the market is likely to see and you want to exceed that. But should we be thinking about 4% as a sort of reasonable expectation or in excess of 4% is a reasonable expectation, assuming no kind of macro volatility or blow up? And then on the returns target, please. So again, it's an area where you're a little bit different from your domestic peers. The last 2 return targets you've given, I guess, have been a little bit more of a through-the-cycle expectation where you would expect to hit them sort of regardless of what was happening to rates and the macro environment. Now that things have settled down from a, I guess, customer behavioral perspective, in particular, on the deposit front, are you going to be giving us a different flavor of return expectation when you're looking out to 2028? So will you be guiding on where you think the business will be in '28 with your base case assumption rather than a sort of a floor underpinning a broader range of potentially more downside scenarios around customer behavior and macro activity and so on?

Great. Okay. Thank you, Chris. So I'll take the second one quickly first. Obviously, we'll see you in February and talk about it. And obviously, some of the topics you alluded to are what we're thinking about as we go into February and we share '28 numbers. But obviously, we will lay out what assumptions we've made around those targets at that time. But it's a very active debate, as you rightly allude to. On the lending side, I think you characterized the position very well and very consistent with how we see it. We're very confident in the track record that we've had. Our ability to grow above market has been proven year-on-year. It does vary by business and market conditions as to as well. But that's what gives us confidence in terms of the outlook for the lending position. I'm not going to declare new targets or new deltas relative to market growth on the call. I think I've given quite enough color about, I guess, our historic track record and how we're thinking about the business going forward to hopefully give you a sense of confidence and optimism we have around the lending profile. Thanks Chris.

Our next question comes from Jonathan Pierce of Jefferies.

I've got 2 questions. One is on the equity Tier 1 target moving forward. Is that something you'll potentially give us a bit more of an update on in February? Or are we going to have to wait until the back end of the year once Basel 3.1 is pretty much nailed down. I ask, of course, because the MDA is 11.6. I guess it drops 30 bps, something like that on Basel 3.1. And it feels like the scope to probably operate towards the lower end of your current range rather than the middle or the upper end of it. The second question is a bit more detailed, I'm afraid, around deferred tax assets. In the 9 months to date, the DTA deduction from capital has fallen by GBP 250 million, and it was GBP 100 million in the last quarter alone. So it's not an insignificant amount of capital build that's now coming from that DTA. So I just wondered if we should expect that sort of run rate to continue until the stock has run out a few years forward. I guess we should because RBS plc is now generating good profit and so on and so forth. And sorry, just a supplementary on that. The last 3 years, you bought back around GBP 300 million a year of unrecognized DTA back onto the balance sheet. Are we going to see the same again in the fourth quarter of this year, Katie?

Okay. Thanks, Jonathan. So Katie, why don't you lead out on the CET1?

And then I will get to...

And then we'll get to some of the DTI.

No, that's all right. It's one of my preferred specialist subjects, so I'll make you wait for the answers on that one just for a little bit longer. But on CET1 Look, there's a lot of things going on at the moment, Jonathan, with CET1, as you're very much aware. Obviously, the Bank of England is looking at their review of capital requirements. So we're looking forward to the FEC's update on that assessment. It's due to come out on December 2. So we'll see what comes through with that. Our approach on capital has always been to review it as part of our annual ICAP process and the risk appetite review that we do as well as working with the PRA on their kind of annual stress tests. And you're familiar with the numbers. We can see that our capital position has really improved over the last couple of years as we've derisked the business. We've also added a significant amount of capital into the business as a result of the RWA inflation that we've had. I think importantly, as part of the SREP process that we had this year that just came out in Q3. Our Pillar 2A there was reduced to -- by 17 basis points. which took our statutory minimum requirement to 11.6%. I do expect that number to reduce further once Basel 3.1 is implemented on the 1st of January 2027. And we've got pretty good line of sight in that. So therefore, when you look at it, you can see that we've got strong buffers relative to that lower bound of 13% of our current targets. So I'm not committing today as to the date or what we might do on any change of our 13% to 14% target, but we are actively thinking about the appropriate capital targets and capital buffers that we have required for our business on a more medium to longer term. Look, if you go to the deferred tax aspect of it, I think there's a couple of things to remember within there that the treatment within capital is slightly different than the treatment within accounting. So you sort of -- you can see changes coming through at different times. differences of recognition versus utilization of those assets. But we have just over GBP 800 million of DTA assets remaining. We have written back about GBP 1.2 billion since 2023. So we don't have a significant amount more to recognize. Interestingly, with deferred tax assets, you've got to really look at where they're sitting in terms of the legal entity structure as well and what's kind of -- and the ability to use them is very much structured by that legal entity structure. We do think, however, that our utilization in Q4 would be around in line with Q3. And then for 2026 onwards, we do expect a slightly lower utilization, probably around GBP 100 million to GBP 150 million per year. So continued support to capital generation, but at a slightly different level just given that we've used a lot of the losses up there or given where other historic losses are sitting and your ability to kind of access them. And Jonathan, we happily have a longer chat on DT offline as well with you, if that's something that would be helpful.

Our next question comes from Guy Stebbings of BNP Paribas Exane.

So just around NII and the NIM bridge in Q3, and then I had one very short supplementary. So the hedge build was, I think, broadly as expected. The better performance in terms of the NIM bridge, I think came from funding and other and then to a lesser extent, the asset margins, which were up fractionally. So firstly, on the funding and other, I think that included some hedge accounting and reallocations between NII and OI. So perhaps you could just clarify exactly what's going on there. And to be clear, if it's correct to think that we should expect any sort of sequential benefits from there, but nor it reverses, that's the right way to think about it? And then on the asset margins, do you think we should expect to see further growth in there? Or is that really just a function of Sainsbury's coming in fully and then perhaps need to be mindful of some minor mortgage spread churn as we look forward? And then just a very quick point of clarification. On RWAs, I recognize the guidance hasn't changed. You flagged the business growth and CRD IV model changes. But just interested if we're coming into Q4 in a slightly better position than you originally thought and whether that means we might be more towards the lower end of that range for the full year guide.

Thanks. Katie, over to you.

Yes, perfect, Lovely. Thanks very much. So first of all, yes, funding and other, up 3 basis points, 2 bps related to treasury, and that's not going to repeat. This bucket is always interesting in the walk. It's got a number of different moving parts within it. And really, it's kind of the reflection of the management of a GBP 700 billion balance sheet that we need to consider kind of in any given quarter. So you do get the odd basis point that comes out. But this quarter, we did implement a hedge accounting solution for some of that FX swap activity that we've talked about over the last number of quarters. It's a one-off 2 bp benefit. in NIM, we don't expect it to repeat nor do we expect it to reverse. But going forward, you should see less volatility in the NIM from that activity quarter-on-quarter, which will be a lower drag to NII, a lower benefit to noninterest income. But really importantly, the same economic benefit overall as we go through. If I look at the asset margin, up 1 basis point is a very kind of small movement. And you're absolutely right, Guy, is benefiting from a whole quarter of Sainsbury's. I'm not expecting particular expansion in that line. It's very much dependent in one quarter on the mix and what you might see kind of happening within there at any time. If I spend a little moment on the kind of mortgage margins that we have within there, you're absolutely right. If you think of where our mortgage margins are versus the NIM overall, that's clearly something that you do see as a bit of a negative -- we've always talked that the book is around 70 basis points. We do see at the moment that we're writing a little below that, just -- and that's very much a symptom of the really intense competition that we're seeing on mortgages. So again, that will be a feature of the NIM as we go through from here. The market does move around in terms of where that is. But certainly, at the moment, there's a little bit of pressure within that space. In terms of RWAs, I would really think of that really as timing as much as anything else. I wouldn't say it's going to be particularly having an impact. In the next quarter, I have talked about more material CRD IV impacts coming through. There'll be a little bit of loan growth, of course. We've obviously continued to work on our risk management -- sorry, our RWA management program as well. But I wouldn't look at that and go actually, that's going to pull them down. It really is just timing. Thanks, Guy. Hopefully, that answered it all.

Our next question comes from Robert Noble at Deutsche Bank.

I wanted to ask one on liquidity, please. So there's been a continued rotation in your liquidity from cash into government bonds that seems to pick up, right? So what's the spread pickup you're getting off that? And hypothetically, could you move all cash into gilts? Or what's the regulatory restriction that caps you out from doing that? And then just on the term deposit outflows in the quarter, should we expect the same next quarter given that 1 year and 2 year ago, rates looked equally as high. Is there a similar maturity issue in Q4?

Thanks, Rob. So I take the deposit one quickly and then back to you liquidity piece. On deposits, Rob, we did have some particularly large maturities in the third quarter. And you're right, if you think back 2 years ago when we had the kind of the backup in rates, they related to that. So it's not that we don't have maturities in quarter 4, but they're not of the same size or price or margin price points as what we had in quarter 3. And as I said, our retention rates are actually quite good. We're just being very dynamic in where we see value and retention and where we don't. So that's how to think about that. Katie?

Yes, sure. On liquidity. So we -- a couple of things going on in that liquidity ratio. One, we've recognized the TFSME repayment that we're about to do given the way that's moved through. So don't -- so don't kind of forget that piece, that will be happening in the next kind of few weeks. But you're absolutely right. If I look at the swap we've made into gilts, it really was a question to get some of that pickup. It's about 50 basis points in the 5- to 7-year kind of level. So very pleased to have done that. We wouldn't move the entire piece of our liquidity portfolio into gilts. That would be not quite putting all your money on black. But it's -- we do kind of obviously have some restrictions around where we have to hold and the restriction is really a function of that leverage ratio as well to make sure that, that's the right balance. I would say at the moment, the portfolio is split around 50-50. So there's plenty of opportunity to do a little bit more of maneuvering into gilts if we think that that's attractive as well. But certainly, just as you would expect us to be being quite dynamic in the management of that portfolio. Thanks very much, Rob.

Our next question comes from Benjamin Toms of RBC.

First one is just to help my structural hedge model, if that's all right. Your guidance this year for structural hedge maturities of GBP 35 billion. Should we be making the same assumption for next year? I'm just conscious that you added to the hedge in '21 and 2022. So I'm not sure whether that should mean there's a pickup in maturities or whether you're just feathering at the front end, which means maturities should be pretty consistent as we go through the years. And then secondly, on other income, you purchased cushion in 2023 to provide workplace pension solutions. Can you just give us your latest strategic thoughts on that part of the business, what you think you do well and what you think you lack?

Yes, perfect. So in terms of the maturity, I mean, Ben, the way that we look at it, it's GBP 172 billion at the moment. It's obviously a function of current account and NIBs growth. We're pleased to see the growth in that. You'll recall that we do a kind of look back of 12 months as we work out how much we're going to reinvest. We also do some work during the year on the behavioral life in terms of what's happening with our actual current account holders and things like that. But actually, what I would guide you to at the moment is think of it really as GBP 35 billion a year. If we see particularly strong growth on those current accounts, it might change in the future years. But for your model, I would stick to the GBP 35 billion number. It's very even because we've been so mechanistic. So I wouldn't kind of deviate from there. Paul, do you want to?

Yes, I'll take workplace pensions. So Ben, cushion is a good business. It's got a strong proposition, very strong technology, and it's proven attractive to our kind of commercial mid-market customers. Obviously, there's kind of legal legal and kind of market dynamics that make it important for a lot of those clients to be able to offer workplace pensions to their employees and colleagues. And it's proven very attractive. And it's -- going forward, I think it's an important part of the proposition that we can provide or facilitate that service. There has also been a series of reg changes in the last couple of years around Master Trust, which certainly lend themselves to Master Trust having significant scale. So net-net, it's a good business. It's an important proposition to be able to offer to our commercial clients, but there have been some regulatory changes as well. So that's how we're thinking about, I guess, that workplace pensions area. Thanks Ben.

Our next question is from Ed Firth of KBW.

I guess I had 2 related questions. I mean the first one is, if I look at your returns in Q3, they're now -- even if you take out the one-off, over 20%. And if I -- if you can normalize, we can normalize the hedge and capital is quite strong. So you're easily getting into the mid-20s or high 20s. And so I'm just trying to think how do you think about that in terms of what is an appropriate level of return? Because we can talk about the operating leverage and lower capital requirements going forward, et cetera, which would push that up even more. And I'm thinking of that, I guess, in the context of a bank tax potentially in November because it feels like it will be quite a tough discussion between you and the government about levels of return and appropriate levels of return. So I guess that would be my first question. At what level do you think we make enough now and actually we should be focusing on growing from here and fixing the returns? I guess that's the first question. Then the second one is sort of related to that. We're all sort of thinking now about -- I know it's sort of 2 years away, but what happens when the hedge runs out. And if you are at sort of peak returns, what do you do next, I guess, is the question? Because there was various discussions earlier in the year about potentially you buying things, but you obviously stepped away from that. And I'm just thinking, is that what we should think about going forward? Because relative to your own returns, I think it's going to be tough to find anything that makes an equivalent level if that's okay. So rather rambling 2 questions, but I think quite key.

Yes. Thanks, Ed. Good to hear from you. I guess there's a number of those points intersect with each other. First thing I'd say is, as you well know, it's taken a long time for a number of banks to return their cost of capital. So in some ways, it's healthy that we're having that discussion. You look at it through another lens, notwithstanding that, U.K. banks are still valued very differently to many other parts of the world for what could arguably be said to be similar businesses, similar business models and mixes and in certain extent, very similar regulatory regimes. I'm going to slightly disappoint you and give you a kind of a politician's answer about what's the right levels of returns. I think the key way we think about it is from a management team perspective and a Board perspective is we need to get the balance right between supporting customers and deploying our capital to do that and helping them grow and hopefully helping the U.K. between investing in the business, it's a very competitive sector, not just the large incumbents, but there's a very broad range of competitors. It's crucial that we invest in the business. And primarily, that relates to technology and people. And we need to make the right returns and return and present what hopefully everybody believes is an attractive investment case. So the debate we have is about the balance between those 3 items. It's a spot RoTE for the quarter. As you say, it has some one-offs in, but yes, fair challenge, it's year-to-date, it's 19.5%. And if you take off the one-offs, it's high 18%. We're working very hard on all the lines, not just the structural hedge. We're trying to grow lending growth. We're driving cost out of the business. We're working the balance sheet an awful lot harder. So we think those returns are the kind of the fruits of our activity. And I think as a Board, you just have to -- we just have to debate, let's get the balance right between making sure we've got a really attractive and sustainable business in the long term, and we're investing it -- we're doing what we need to do in terms of supporting customers and delivering returns. So that's how we think about it. I know I haven't shared a number there for -- because I don't think that's the appropriate way to do it. On M&A or kind of where does that lead, which is a very connected question. The strategy is working. I laid it out 2 years ago. The organic plan is obviously proving successful. We're growing all 3 of our businesses. We're driving a lot of simplification. I think we've got a good runway to go. We've managed to do that without changing our kind of risk profile. That hasn't been a constraint on our growth. We've continued to grow. So that's great. So organic plan looks good. If opportunities come to accelerate that plan, then we'll look at them. You'll have heard probably 5 times my quote about the financial high bar, but that remains true. It has to be -- if we're going to deploy capital on something that we think can accelerate the plan, it has to be compelling from a shareholder perspective. And that's how we look at things. It has to Otherwise, it's -- I think it's a hard case for me to make to investors. So we will look, but we'll be cold eyed. And the counterfactual, as you say, when the organic plan is performing so well, the counterfactual can be arguably more challenging. But I think I have a responsibility to do that in terms of the alternative uses of the capital. So I've expanded a little bit there. Hopefully, that's given you a sense of just how as management, we think about those topics.

We are now approaching 10 a.m. So we'll take our last question from Andrew Coombs from Citi.

I guess one follow-up and 2 follow-ups really. Just firstly, on that point about capital return versus inorganic versus organic loan growth. I mean, you yourself have said there's a very high bar for inorganic given the returns you're already producing. And obviously, now you're trading well above tangible book. The buybacks are also slightly less accretive than they would have once been. So when you're thinking about the dividend payout, the 50% policy, any reason why that couldn't be higher going forward? What are the pros and cons of shifting that dividend payout ratio? And then second question, just on the structural hedge. You're still at 2.5-year average duration. Your peers are all now at 3.5 partly due to what they see to be the behavioral life of the deposit base. I'm sure partly due to technical reasons as well. But perhaps you could elaborate on the maturity profile of the hedge and why you don't see the need to increase it here.

Great. Thanks, Andrew. I'll take the first. You take the second, Katie?

Okay.

Okay. So Andy, obviously, we've increased the ordinary dividend from 40% to 50%. We're in the first year of that. In parallel, we'll also said we'll look at surplus capital at the half year and the full year, as you would expect us to with the Board. We're very keen to have a consistent approach to surplus capital distribution. So we're not actively reviewing the ordinary at the moment. But over time, obviously, it's a responsible thing for the Board to do. Katie, on the average life of the hedge?

Yes, absolutely. So it's interesting -- as we look at the hedge, it's important to remember the hedge has got 2 portions within it. There's the equity hedge and also the product hedge. So you're absolutely right. The product hedge is 2.5%. The total hedge is closer to 3. I think it's important as you look at the assumptions on this is the mechanistic model that we've had has played out very well for us. I mean, for me, I think you'd only increase your duration if you felt the duration of your eligible deposits had increased based on behavioral assumptions. I think given what we are seeing in terms of movement that we have not just on the current accounts, that wouldn't actually necessarily be something that I would say that we've seen in our books. I'm not doing that. And I think it's also really important. We've always been very clear that with the hedge. It isn't there for us to express a view on where rates are sitting. Others sometimes have taken different views on that, and you need to talk to them on that. But that's -- for me, if you were to try to extend at this point, the absolute pickup you'd be getting wouldn't be logical for the difference you would be making in it. And we don't necessarily see that actually within our underlying numbers that we're seeing those changes in behavioral likes that would also support that duration extension of that. But overall, product hedge 2.5 years, total hedge about closer to 3, very comfortable with the performance of it served us well for many, many years. And as we look at that increase in income this next year into 2026, greater than GBP 1 billion and continuing to grow as we go out to 2028 as well. So very happy with how it's performing. Thanks very much.

Thank you for all your questions today. I will now pass back to Paul to close.

Yes. Thanks, Oliver, and thank you, everybody, for your questions. We appreciate both your time and the insightful questions on the call. So to wrap things up, we're very pleased with the performance in quarter 3 and the continuing momentum we've got in our 3 businesses. We've upgraded our income and returns guidance, and we continue to see opportunities, as I think we've conveyed today to continue to take market share and grow those businesses. We look forward to catching up with you at a couple of things. We've got the retail banking spotlight on November 25. And also, as I said earlier, we'll update you on our guidance for 2026 and share our new targets for 2028 at the full year in February. So I wish you all a good weekend. Thank you.

Thanks very much.

That concludes today's presentation. Thank you for your participation. You may now disconnect.