NatWest Markets Profits Surge Over 300% to £275m in 2025 on Strong Currency and Capital Markets Performance

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.