How NatWest Group plc Makes Money

NatWest Group generates revenue through three primary business segments that collectively produced $18.7 billion in total income during FY2024. The Retail Banking segment contributed $7.2 billion, or approximately 38.4% of total income, serving 19 million customers through the NatWest, Royal Bank of Scotland, and Ulster Bank brands. This segment's revenue derives from net interest income on mortgages ($274.4 billion in net loans to customers), personal loans, and credit cards, plus non-interest income from fees, payments services, and insurance products. The segment's net interest margin was 2.36% in FY2024, with a cost-to-income ratio of 50.0% excluding litigation and conduct costs. Retail Banking's operating profit reached $3.1 billion in 2024, generating a return on equity of 19.9%. The segment's digital footprint is substantial: 10.5 million active mobile app users, with customers logging in an average of 33 times per month, and 70% of active current account customers using the mobile app. The acquisition of Sainsbury's Bank credit card balances in 2024 added approximately $3.4 billion in credit card receivables and expanded the unsecured lending book. The Private Banking & Wealth Management segment generated $1230.6 million in total income in FY2024, representing 6.6% of group income. This division serves high-net-worth individuals through Coutts & Co., Adam & Company, and NatWest Premier, managing $62.1 billion in assets under management and administration (AUMA). The segment's net interest margin of 2.40% and operating profit of $335.3 million yielded a 14.2% return on equity. AUMA income contributed $342.9 million, with net flows of $4.1 billion in 2024. The segment's cost-to-income ratio of 73.6% reflects the high-touch service model and regulatory compliance costs associated with wealth management. The Commercial & Institutional segment is the largest revenue contributor, generating $10.1 billion in total income, or 54.1% of the group total in FY2024. This segment serves business banking, commercial mid-market, corporate, and institutional clients across the UK, Channel Islands, Isle of Man, Gibraltar, and Luxembourg. Net interest income of $6.8 billion and non-interest income of $3.3 billion — including lending and financing fees, payment services, markets trading, and capital markets underwriting — drove the segment's $4.6 billion operating profit and 17.2% return on equity. The segment's net interest margin was 2.16% in 2024, with a cost-to-income ratio of 51.8%. Commercial & Institutional provided $9.9 billion in climate and sustainable funding and financing in 2024, supporting the group's $127.0 billion target by end-2025. The segment's net loans to customers increased by $12.7 billion, or 7.6%, in 2024, driven by growth in Corporate & Institutions and Commercial Mid-market, partly offset by $2.5 billion in UK Government scheme repayments. The group's revenue model depends heavily on the interest rate environment. Net interest income of $14.3 billion represented 76.7% of total income in FY2024, earned through the spread between interest received on loans and investments ($32.0 billion) and interest paid on deposits and borrowings ($17.7 billion). Non-interest income of $4.4 billion, or 23.3% of total income, includes fees and commissions receivable ($4.0 billion), trading income ($1047.8 million), and other operating income. The group's net interest margin expanded from 2.13% in FY2024 to 2.34% in FY2025, reflecting deposit margin expansion and structural hedge benefits. If the Retail Banking segment's mortgage book were to experience a 20% decline in origination volume, the group would lose approximately $1.4 billion in annual net interest income, given the segment's 2.36% net interest margin on $274.4 billion in loans. The group's operating expenses totaled $10.4 billion in FY2024, including staff costs of $5.2 billion, premises and equipment of $1.5 billion, and depreciation and amortization of $1.3 billion. Litigation and conduct costs added $374.6 million, reflecting ongoing regulatory and legacy issue remediation. The cost-to-income ratio excluding litigation and conduct was 53.4% in 2024, improving to 48.6% in 2025 as simplification and digital transformation reduced unit costs. The group's loan impairment charge was $455.9 million in FY2024, or 9 basis points of gross customer loans, reflecting the strong credit quality of its prime-focused book. The bank's structural hedge — a portfolio of interest rate derivatives designed to protect net interest income from rate fluctuations — generated significant income expansion in 2024-2025, with management guiding to an additional $1.9 billion in structural hedge income in 2026 compared with 2025, and a further $1.3 billion in 2027. This hedge is critical to the business model: without it, the group's net interest margin would be exposed to the Bank of England's base rate decisions, which cut rates from 5.25% to 4.5% between August 2024 and February 2025. The group's funding model relies on customer deposits of $550.5 billion, which fund 76% of net loans to customers. The loan-to-deposit ratio was 88% in 2025, up from 85% in 2024, reflecting disciplined growth. Wholesale funding totaled $112.1 billion, with an average Liquidity Coverage Ratio of 147%, providing $64.1 billion in headroom above the 100% regulatory minimum. The group's capital generation pre-distributions was 243 basis points in FY2024, supporting ordinary dividends of approximately 50% of attributable profit and share buybacks. In FY2025, total distributions deducted from capital reached $5.2 billion, including a final dividend of 23.0 pence per share and a $952.5 million share buyback program. The bank's revenue streams are geographically concentrated: approximately 95% of income is generated in the UK, with small operations in Ireland (Ulster Bank), the Channel Islands, Isle of Man, Gibraltar, and Luxembourg. This concentration is both a strength — deep customer relationships and market knowledge — and a vulnerability to UK-specific economic shocks, such as the 2022-2024 cost-of-living crisis that increased impairment charges in the unsecured lending book.

NatWest Group's growth strategy for 2025 and beyond centres on four priorities: growing its core UK banking franchise, deepening customer relationships through digital capabilities, expanding its Private Banking and Wealth Management business, and executing disciplined capital returns to shareholders. On the franchise side, NatWest is investing in mortgage market share by combining competitive pricing with rapid decisioning capabilities powered by its digital mortgage platform, targeting first-time buyers and switchers who represent the highest-value acquisition segments. The group is simultaneously expanding its unsecured lending book cautiously, having seen consumer credit demand recover in 2024 while maintaining conservative credit quality standards. In digital banking, NatWest has consolidated its retail brands onto a unified digital platform and invested heavily in the Cora AI assistant and open banking-enabled payment solutions, aiming to reduce cost-to-serve and increase active digital users beyond the 10 million already engaged through its mobile apps. The Private Banking and Wealth Management segment is a deliberate growth priority: NatWest is expanding its Coutts and Premier Banking offering to affluent customers in the £75,000-plus income bracket, a segment that generates higher net interest margins and fee income than standard retail accounts. On capital returns, the group has committed to maintaining a Common Equity Tier 1 ratio above 13% while returning surplus capital through dividends and share buybacks, targeting an ordinary dividend of approximately 17p per share for 2024 with additional buybacks funded by capital generation above requirements. The strategic constraint is the group's heavy concentration in the UK market, which means growth is closely tied to UK economic conditions, property market cycles, and the Bank of England base rate trajectory.