NatWest Markets 2025: Profit up over 300% to £275 million – what changed?
NatWest Markets Group (NWM Group) turned in a markedly stronger 2025, posting a profit of £275 million versus £63 million in 2024. The engine room was a step-up in Currencies and Capital Markets, supported by a higher profit share from fellow NatWest Group subsidiaries and some one-off gains. Costs rose, but were outweighed by income growth and a hefty tax credit.
Importantly, profit before tax was £160 million, with the tax credit of £115 million lifting the bottom line. That tells you some of the improvement is non-recurring. Still, the operational picture did get better.
| Key numbers (FY 2025) | Reported |
|---|---|
| Profit for the year | £275 million (2024: £63 million) |
| Total income | £1,471 million (2024: £1,237 million) |
| Operating expenses | £1,308 million (2024: £1,208 million) |
| Net interest income | £488 million (2024: £432 million) |
| Non-interest income | £983 million (2024: £805 million) |
| Currencies income | £632 million (2024: £525 million) |
| Capital Markets income | £749 million (2024: £666 million) |
| Fixed Income income | £135 million (2024: £190 million) |
| CET1 ratio (NWM Plc) | 18.4% (2024: 18.2%) |
| Leverage ratio (NWM Plc) | 5.0% (2024: 5.5%) |
| Average LCR (liquidity) | 198% (2024: 192%) |
| Total assets | £168.4 billion (2024: £183.2 billion) |
Currencies and Capital Markets did the heavy lifting
Total income rose by £234 million to £1,471 million. The mix matters:
- Currencies: up to £632 million, reflecting strong client activity and nimble navigation of volatile FX markets.
- Capital Markets: up to £749 million, with net interest income helped by growth in lending activity.
- Fixed Income: down to £135 million as tougher markets and lower client volumes bit.
There were also helpful tailwinds: a £43 million year-on-year increase in the profit share recognised from fellow NatWest Group subsidiaries (total £189 million), one-off gains including a dividend from the restructuring of a strategic investment, and lower FX reserves recycling losses. On the flip side, lower Own Credit Adjustments (OCA) did not move the dial – just £1 million in 2025.
Translation: the core client franchises in currencies and capital markets are doing their job, while some non-recurring items gave an extra boost.
Costs: technology and people inflation offset lower legacy charges
Operating expenses rose £100 million to £1,308 million. Litigation and conduct costs fell to £63 million (from £102 million) as legacy issues continue to wind down. However, other operating expenses climbed £139 million to £1,245 million, driven by technology investment, higher staff costs, lower VAT recoveries, and the absence of a 2024 property-related credit. Severance costs reduced, partially offsetting.
Quarterly colour is useful: Q4 operating expenses were seasonally higher, including the annual bank levy and weaker VAT recoveries versus Q3. Expect some normalisation after these one-offs, but the underlying tech and people spend looks sticky.
Capital, leverage and MREL: strong today, guided to normalise
On a legal-entity basis (NWM Plc), capital is robust. The CET1 ratio – a core equity buffer against risk-weighted assets (RWAs) – increased to 18.4% from 18.2%, with RWAs rising to £21.5 billion as lending and operational risk moved higher while market risk fell on active management. The leverage ratio – capital over total exposure regardless of risk weight – decreased to 5.0% (from 5.5%) on lower Tier 1 capital and higher leverage exposure.
The MREL ratio (minimum own funds and eligible liabilities, a key resolution buffer) fell to 45.6% of RWAs from 48.2% as RWAs rose and eligible capital decreased following the redemption of $1.15 billion of AT1 notes, partially offset by £600 million of new AT1 and fresh internal MREL instruments.
New medium-term guidance points to a CET1 ratio of around 14%, MREL ratio above 30%, and leverage ratio above 4%. That suggests today’s high cushions are expected to drift down towards more typical levels.
Liquidity and funding: coverage up, funding sensibly prefinanced
Average LCR – a regulatory short-term liquidity metric – improved to 198% (from 192%). The liquidity portfolio stood at £20.2 billion at year-end. Stressed Outflow Coverage, an internal three-month stress measure, was 165% (down from 179%).
NWM Plc issued £7.9 billion of public benchmark funding in 2025 across EUR, USD, CHF and AUD markets, including prefinancing 2026 needs, and added a further €1.0 billion in January 2026. Sensible timing in favourable conditions lowers execution risk and supports the liquidity stack.
Balance sheet: derivatives down, client lending up
Total assets and liabilities both fell by £14.8 billion to £168.4 billion and £161.4 billion respectively, primarily due to lower derivative fair values as FX and rates moved through 2025 (notably a weaker USD versus contrasting Q4 2024 trends). This does not necessarily mean less client activity – just lower mark-to-market balances.
Under the surface, funded assets (excluding derivatives) rose £2.4 billion, with loans at amortised cost up £5.6 billion to £24.7 billion, signalling growth in client lending within Capital Markets. Deposits at amortised cost increased £6.3 billion to £15.7 billion, and other financial liabilities include £27.2 billion of medium-term notes outstanding. It’s a cleaner, more client-centric balance sheet shape.
Tax credit and one-offs flattered the headline profit
The £115 million tax credit on £160 million of profit before tax was driven by revised estimates of deductible costs and a write-back of deferred tax on NWM N.V. losses. Add in the dividend from a strategic investment restructuring and you have a year where non-underlying items helped. That does not detract from genuine progress in currencies and capital markets – it just means 2026 will need solid underlying delivery to hold the line.
Litigation: mostly de-risking, with a few moving parts
Legacy legal themes continue to ease. In the UK FX collective action, the Supreme Court reinstated the Competition Appeal Tribunal’s refusal of opt-out proceedings – a positive. The New York odd-lot corporate bonds case was dismissed and not appealed. The 1MDB claim against a Swiss Coutts entity was discontinued. In USD LIBOR, summary judgment in favour of defendants is being appealed; in Euribor, claims were reinstated and return to district court. A new Oracle securities class action (January 2026) names NWMSI among underwriters, with Oracle indemnities noted. Overall, the trend feels more manageable – reflected in lower litigation and conduct costs of £63 million.
What this means for investors
Positives to take away
- Income growth where it matters: Currencies and Capital Markets delivered higher revenues despite choppy markets.
- Capital and liquidity remain strong: CET1 at 18.4% and average LCR at 198% provide clear resilience.
- Legacy drag easing: Litigation and conduct costs declined £39 million year-on-year.
- Proactive funding: £7.9 billion raised in 2025 plus €1.0 billion in January 2026, with prefinancing of 2026 needs.
Things to watch
- Quality of earnings: The tax credit (£115 million) and one-off gains buttressed net profit – not a baseline to bank on.
- Cost trajectory: Technology and staff costs lifted other operating expenses by £139 million – a focus area for 2026 discipline.
- Fixed Income softness: Revenues fell to £135 million amid lower client activity – a potential swing factor if markets normalise.
- Capital normalisation: Management’s guidance (CET1 ~14%, MREL >30%, leverage >4%) implies buffers trend lower over time.
My take: solid franchise momentum, but 2026 needs cleaner earnings
This is a good set of results on the things NWM can control – client activity, balance sheet shape, liquidity and funding. The headline profit surge owes something to tax and one-offs, so the underlying step-up is more modest than the 300% headline suggests. Even so, higher income, prudent funding and tighter litigation risk are all moving in the right direction.
For bond investors in the NWM capital stack, robust liquidity and thick current capital cushions are reassuring, even with guidance pointing to normalisation. For watchers of NatWest Group’s Commercial & Institutional segment, the profit share contribution and lending growth reinforce the strategic role NWM plays. Into 2026, keep an eye on cost control, the tax rate resetting, and whether Fixed Income can find a better gear if market conditions improve.
