NatWest Markets Interim Results 2026: Higher Income Offset by Rising Costs

NatWest Markets Plc reported resilient customer demand and higher income for the first half of 2026, despite geopolitical tensions, energy market disruption and uncertain interest rate and growth prospects.

However, the stronger top line did not translate into higher underlying profit. Operating expenses rose sharply, partly because of a charge relating to historical VAT matters and higher technology and central support costs.

The result was a drop in operating profit before tax from £98 million to £45 million. A £32 million tax credit then helped lift profit for the period to £77 million, limiting the year-on-year decline at the bottom line.

NatWest Markets' key H1 2026 figures

Metric	H1 2026	H1 2025	Change
Total income	£792 million	£762 million	Up £30 million
Operating expenses	£752 million	£667 million	Up £85 million
Operating profit before tax	£45 million	£98 million	Down £53 million
Profit for the period	£77 million	£89 million	Down £12 million
Net interest income	£250 million	£244 million	Up £6 million
Non-interest income	£542 million	£518 million	Up £24 million
Impairment releases	£5 million	£3 million	Up £2 million

The headline tension is straightforward. Income increased by 3.9%, but operating expenses rose by 12.7%. That left substantially less profit before tax, even though the reported profit for the period held up better because of the tax credit.

Investors can read the original company announcement for the complete interim accounts and risk disclosures.

What drove the increase in income?

The £30 million increase in total income came from several areas rather than broad-based growth across every product line.

A £40 million gain arose from recycling foreign exchange reserves following a subsidiary capital repayment. This is an accounting-related gain connected with the capital action, rather than ordinary customer trading revenue.

NatWest Markets also recognised £103 million under its profit-sharing arrangement with fellow NatWest Group subsidiaries, up from £79 million in H1 2025. The arrangement rewards NatWest Markets for its contribution to NatWest Group's Commercial & Institutional business.

Capital Markets revenue increased from £370 million to £397 million. The company said loans to customers also grew as a result of higher Capital Markets activity.

The performance was less convincing elsewhere.

Product income	H1 2026	H1 2025
Fixed Income	£52 million	£105 million
Currencies	£318 million	£327 million
Capital Markets	£397 million	£370 million
Capital Management Unit and other	£41 million	£2 million

Fixed Income revenue roughly halved, with geopolitical volatility and lower customer volumes weighing on the result. Currencies remained the second-largest contributor but slipped by £9 million.

This means the overall income increase was supported by Capital Markets, the larger profit-share contribution and FX reserve recycling. The mix matters because the £40 million recycling gain is not presented as recurring operating activity.

Costs are the main concern

Operating expenses increased by £85 million to £752 million, absorbing most of the group's £792 million of income.

Litigation and conduct costs provided one positive signal, falling from £65 million to £45 million. The prior-year period included higher costs associated with closing legacy matters and related remediation.

Unfortunately, that £20 million improvement was more than offset by a £105 million increase in other operating expenses to £707 million.

NatWest Markets attributed this to a charge relating to historical VAT matters, alongside higher technology-related and centrally allocated support costs. The precise size of the VAT-related charge was not disclosed.

Other administrative expenses increased from £360 million to £433 million. This included £328 million of recharges from other NatWest Group entities, compared with £285 million a year earlier.

The direction of travel here deserves attention. Technology spending may support resilience and capability, but a cost increase that materially outpaces revenue growth places pressure on profitability.

Second-quarter momentum improved

The second quarter was stronger than the first at the income and profit level.

Total income increased from £356 million in the first quarter to £436 million in the second. Operating profit before tax improved from £4 million to £41 million, while profit for the period rose from £28 million to £49 million.

Fixed Income revenue increased from £20 million to £32 million quarter on quarter, while Capital Markets moved from £194 million to £203 million.

Still, expenses also rose from £353 million to £399 million. The second-quarter improvement therefore does not remove the cost issue, although it does show better business momentum as the half progressed.

Capital and liquidity remain strong

NatWest Markets maintained substantial capital and liquidity buffers.

Risk-weighted assets, or RWAs, increased from £21.5 billion at the end of 2025 to £22.1 billion. RWAs measure assets after adjusting for their regulatory risk and help determine how much capital a bank must hold.

The Common Equity Tier 1 ratio was 18.3%, compared with 18.4% at December 2025. CET1 is a key measure of a bank's highest-quality loss-absorbing capital. The movement was small, with higher capital partly offsetting increased RWAs.

The detailed capital table reported a leverage ratio of 4.9%, down from 5.0%. Meanwhile, the average Liquidity Coverage Ratio rose from 198% to 204%. This measures the ability to meet estimated short-term cash outflows using high-quality liquid assets.

The liquidity portfolio remained broadly stable at £20.0 billion. NatWest Markets also completed £3.7 billion of public benchmark issuance during the half year.

These figures suggest the weaker pre-tax result was not accompanied by an obvious deterioration in capital or liquidity strength.

A much larger balance sheet

Total assets increased by £18.3 billion from the end of 2025 to £186.7 billion, while total liabilities rose by £18.4 billion to £179.8 billion.

Much of this expansion came from settlement balances, which can fluctuate with the timing and volume of trading activity. Settlement assets increased from £0.6 billion to £10.1 billion, while the corresponding liabilities rose from £0.9 billion to £9.6 billion.

Loans measured at amortised cost increased by £3.8 billion to £28.5 billion, reflecting higher customer lending associated with Capital Markets growth. Cash and central bank balances rose by £2.1 billion to £18.1 billion.

Derivative assets and liabilities also increased, mainly because of foreign exchange movements and volatility across major currencies, including a stronger US dollar during the period.

What investors should watch next

There are three central issues for investors following NatWest Markets.

First, Capital Markets activity and customer demand in foreign exchange risk management remained resilient. Improved second-quarter Fixed Income momentum is also encouraging after a difficult first half overall.

Second, revenue quality is mixed. The £40 million FX reserve recycling gain and higher intra-group profit share supported income, while core Fixed Income and Currencies revenues were below the prior-year period.

Third, cost control is now the clearest challenge. A £30 million income increase was outweighed by an £85 million rise in expenses, causing pre-tax profit to more than halve.

Capital and liquidity remain robust, and impairment charges are not currently a major pressure. The next results will need to show whether improved second-quarter trading momentum can continue and whether expenses begin to normalise after the historical VAT charge and higher support costs.