London, May 14, 2026, 13:07 BST
NatWest Group Plc’s main banking units were lifted to AA from AA- by Fitch Ratings, a credit upgrade that landed just as Britain moved to rewrite rules separating retail banks from riskier trading operations. NatWest said the outlook on the entities remained stable and the action followed an update to Fitch’s bank rating criteria.
The timing matters. The government’s new Enhancing Financial Services Bill is set to update the ring-fencing regime, the post-crisis rulebook that forces big UK banks to keep everyday retail banking apart from investment banking. Reuters reported that the rules apply to banks with more than £35 billion in retail deposits, including NatWest, Lloyds, HSBC, Barclays and Santander UK.
For NatWest, this is not an abstract reform. Its retail bank is ring-fenced, while NatWest Markets runs outside the ring fence, according to the bank’s own customer guidance. That split affects how the group serves corporate clients, uses shared infrastructure and allocates capital across the business.
A separate Q1 Pillar 3 disclosure for National Westminster Bank Plc, the group’s ring-fenced bank, showed a common equity tier 1 ratio of 11.9%, up from 11.2% at the end of 2025. CET1 is a core measure of bank capital strength; the same filing showed a UK leverage ratio of 4.4%, up from 4.2%.
NatWest shares were firmer in early afternoon London trade. AJ Bell quoted the stock at 568.20 pence to sell and 568.40 pence to buy, up 0.78%, with about 4.16 million shares traded.
The bank entered the week with decent earnings cover. On May 1, NatWest reported £1.4 billion of attributable profit for the first quarter and return on tangible equity, a measure of profit against tangible shareholder equity, of 18.2%. Chief Executive Paul Thwaite said the “external environment has become more challenging,” though the bank raised income guidance to the top end of its £17.2 billion-£17.6 billion range. NatWest Group
Analysts have split the story into two parts: a stronger bank, but a tougher UK backdrop. Morningstar senior equity analyst Niklas Kammer wrote that NatWest offered the “best risk-reward trade-off among the UK banks,” while warning that persistent macro uncertainty could force larger loan-loss write-offs. Morningstar
Matt Britzman, senior equity analyst at Hargreaves Lansdown, wrote that “guidance took centre stage” after the Q1 update. He said loan growth, deposits and margins pointed to a business holding up well, though slower economic growth remained a risk for investors. Hargreaves Lansdown
Rates are still the swing factor. A Polymarket contract on the Bank of England’s June 18 meeting showed traders assigning an 86.5% probability to no change in Bank Rate, while a separate 2026 market put the chance of at least one Bank of England rate hike this year at 56%.
That matters for NatWest because higher rates can support lending margins, but only up to a point. A Reuters poll published Wednesday found economists expected the Bank of England to hold rates at 3.75% this year, although more than a third now expect at least one increase as energy-driven inflation pressure builds.
The broader UK market is not calm. UK shares rose Thursday after stronger-than-expected first-quarter growth, but Reuters reported that investors were still weighing political uncertainty, elevated borrowing costs and concern about any future rise in bank taxes.
The risk is that the credit upgrade and regulatory reform prove less useful than they look. NatWest’s rating move came from a Fitch criteria change, not a new trading update, and any easing of ring-fencing still depends on the final bill and regulatory detail. If inflation forces higher rates while gilt-market stress deepens, loan demand, borrower quality and investor appetite for UK banks could all move the wrong way.
