NatWest Markets Q1 2026 results: profit dropped, but the balance sheet still looks solid
NatWest Markets Group had a much softer first quarter than a year ago. Profit for the period came in at £28 million, down from £60 million in Q4 2025 and £59 million in Q1 2025.
The headline reason is straightforward enough. Management says elevated uncertainty, rising volatility and heightened geopolitical tensions disrupted markets, which hurt parts of the business – especially Fixed Income – while stronger foreign exchange trading helped offset some of that weakness.
My read is this was not a crisis quarter, but it was clearly a low-margin one. NatWest Markets stayed profitable, kept strong capital and liquidity, and made progress on legacy legal issues, but the earnings quality looks a bit thin because costs still ate up almost all of the income generated.
NatWest Markets Q1 2026 key numbers investors should focus on
| Metric | Q1 2026 | Q4 2025 | Q1 2025 |
|---|---|---|---|
| Total income | £356 million | £383 million | £394 million |
| Operating expenses | £353 million | £372 million | £323 million |
| Operating profit before tax | £4 million | £9 million | £70 million |
| Profit for the period | £28 million | £60 million | £59 million |
| CET1 ratio | 18.3% | 18.4% | Not disclosed |
| Leverage ratio | 4.7% | 5.0% | Not disclosed |
| Average LCR | 204% | 198% | Not disclosed |
Why NatWest Markets profit fell in Q1 2026
Total income fell to £356 million, down £27 million quarter-on-quarter and down £38 million year-on-year. That decline was driven by a couple of things: a dividend received in Q4 2025 did not repeat, and the amount recognised under the profit share arrangement with fellow NatWest Group subsidiaries was lower than in the previous quarter.
There was also a clear trading weakness in Fixed Income. That business produced just £20 million of income in Q1 2026, versus £64 million in Q1 2025. Management points to geopolitical tensions, market volatility and lower customer volumes.
That matters because it shows volatility does not automatically mean banks make more money. If clients step back, or trading conditions get messy rather than active, revenue can fall rather than rise.
Foreign exchange and capital markets helped steady the ship
There were some better spots in the quarter. Currencies income rose to £161 million, up from £147 million in Q4 2025 and slightly ahead of £158 million a year earlier.
Capital Markets also improved, generating £194 million compared with £190 million in Q4 2025 and £181 million in Q1 2025. That tells you the core franchise was not broadly weak – the problem was more concentrated in Fixed Income and some non-repeat income items.
Net interest income was another modest positive, up to £131 million from £124 million in Q1 2025. NatWest Markets says this reflected growth in lending activity, partly offset by higher funding costs.
Costs were better than last quarter, but still too high versus last year
Operating expenses came in at £353 million. That was £19 million lower than Q4 2025, which is encouraging, but still £30 million higher than Q1 2025.
The good news is that litigation and conduct costs – effectively the bill for legal, regulatory and remediation issues – fell to £19 million, down from £24 million in Q4 2025 and £32 million in Q1 2025. NatWest Markets says this reflects ongoing progress in closing legacy matters.
The less cheerful bit is that other operating expenses rose year-on-year to £334 million, up from £291 million in Q1 2025. The main driver was higher technology investment costs. That may be sensible spending in the long run, but in the short run it squeezed profitability hard.
One important detail: operating profit before tax was only £4 million. The final profit number of £28 million was helped by a £24 million tax credit. So while the group stayed profitable, the underlying operating performance was pretty slim.
NatWest Markets capital, liquidity and funding remain strong
This is where the update looks more reassuring. CET1 – the core capital ratio banks use to show financial strength – was 18.3% at 31 March 2026, only slightly down from 18.4% at 31 December 2025.
Risk-weighted assets, or RWAs, rose to £22.2 billion from £21.5 billion. RWAs are assets adjusted for regulatory risk, and the increase was mainly driven by higher market risk and counterparty credit risk.
The leverage ratio slipped to 4.7% from 5.0%, reflecting higher trading assets. That is not ideal, but it does not look alarming in the context of this statement.
Liquidity was strong too. The average Liquidity Coverage Ratio, or LCR – a measure of how well a bank can meet short-term outflows – increased to 204% from 198%. The liquidity portfolio stayed at £20.2 billion.
NatWest Markets also issued £2.6 billion of public benchmark funding in the quarter. That included €1.0 billion under its Euro Medium Term Note programme and $2.3 billion under its US Medium Term Note programme.
Balance sheet growth shows more market activity, not necessarily better profitability
Total assets increased to £197.4 billion from £168.4 billion, while total liabilities rose to £190.5 billion from £161.4 billion. Funded assets rose by £23.4 billion, driven by higher trading assets, settlement balances and cash held at central banks.
There was also a rise in derivative assets and liabilities, mainly due to foreign exchange derivatives as the US dollar strengthened during the quarter. For investors, this is more a sign of busier and more volatile markets than a direct marker of better returns.
In other words, the balance sheet got larger, but profits did not follow. That is the bit worth keeping an eye on.
Litigation and regulatory progress is real, but the legacy overhang is not gone
There was genuine progress here. NatWest Markets says litigation and conduct costs are falling, and the US authorities determined that a monitorship linked to historical spoofing conduct was no longer necessary.
That said, the court approved an agreement extending NWM Plc’s obligations under the plea agreement and probation until December 2026. The company also warns that failure to meet those obligations could lead to adverse consequences, including increased costs.
There are still live matters too, including swaps antitrust litigation and Oracle securities litigation. So this is better, but not finished.
What NatWest Markets Q1 2026 means for retail investors
If you follow the wider NatWest story, this update says the markets arm is stable but not firing on all cylinders. The positives are strong capital, strong liquidity, decent performances in Currencies and Capital Markets, and lower litigation costs.
The negatives are just as clear. Profit more than halved year-on-year to £28 million, Fixed Income weakened sharply, and operating costs – especially technology investment – remain heavy.
My verdict is mildly cautious. There is nothing here that screams balance sheet stress, and that matters a lot for any banking business. But the earnings picture was soft, and until revenue growth starts outrunning costs again, this looks more like a quarter of resilience than a quarter of momentum.
One final point on the ESG update
NatWest Markets said it had delivered £5.9 billion towards NatWest Group’s target to provide £200 billion in climate and transition finance between 1 July 2025 and the end of 2030. Useful to note, but it is not the number driving this quarter’s investment case.
The bigger story in this RNS is simpler: markets were tough, Fixed Income struggled, legal costs improved, and the capital base stayed robust.
