London, May 13, 2026, 12:03 BST
- NatWest hovered between 557p and 560p, slipping from an initial 572.8p. The stock had dropped 3.2% to 562.8p on Tuesday.
- Fitch upgraded several major NatWest subsidiaries, which gave the credit story a lift. Still, shares remain at the mercy of UK political jitters, gilt market pressure, and renewed concerns over bank taxes.
- Bulls highlight improved income guidance, an 18.2% first-quarter return on tangible equity, plus the benefit from higher-for-longer rates. Bears, though, see credit provisions, squeezed mortgage margins, and the possible hit from a higher UK bank surcharge.
NatWest Group shares in London weren’t reacting to disappointing earnings—they slipped anyway, caught up in a stronger macro move that overshadowed a straightforward credit-positive. The delayed price feed had them hovering between 557p and 560p, down from a 572.8p open and Tuesday’s 562.8p finish.
Fitch handed NatWest a win: the ratings agency bumped long-term issuer default ratings and senior unsecured debt for several subsidiaries—including National Westminster Bank and Royal Bank of Scotland—up to AA from AA-, keeping a stable outlook. Shares edged 1.0% higher to 564.8p in early Wednesday trading, according to Alliance News via AJ Bell. Still, that initial uptick didn’t put the debate to rest.
Why it matters: The upgrade gives banks a bit more stability on the funding front, though it does little for stocks right now. A higher rating shores up access to wholesale funding, yes, but equity investors are fixated on something else: can profits hold up if UK politics shift, bank taxes tick higher, and gilt yields stay north of 5%? Gilts—the UK’s government bonds—shape everything from mortgage rates to bank valuations and the overall cost of money in the economy.
Tuesday’s session delivered a jolt. According to Reuters, UK long-term borrowing costs jumped to levels not seen in almost three decades, as investors fretted over the prospect of leadership changes undercutting fiscal discipline. Shares of Barclays, NatWest, and Lloyds each slid more than 3%. JPMorgan analysts noted the UK banking surcharge could climb to 5% from the current 3% if government policy lurches left.
Political jitters lingered into Wednesday, sending sterling lower once again as Starmer refused to step down. Peel Hunt’s Kallum Pickering warned of a “summer of severe political uncertainty.” For NatWest, that’s no sideshow—domestic banks often end up standing in for UK fiscal trust, and this time is no exception. Reuters
Traders aren’t shrugging this off as background noise, if prediction markets are any guide. On Polymarket, odds of Starmer stepping down by June 30 sit at 45%, rising to 72% by year-end. In the June Bank of England market, traders are pricing in an 83% chance that rates stay put, while a quarter-point hike is seen at 18%. Elsewhere on Polymarket, the contract pegging a Bank of England hike at some point in 2026 stands at 65%. For reference, the Bank last left rates unchanged at 3.75%, with the decision split 8–1.
The rate outlook is crucial for NatWest’s story. CFO Katie Murray, speaking on the first-quarter call, said the 2026 guidance is now built on a Bank Rate of 3.75% this year—no longer the 3.25% previously expected. NatWest now sees income excluding notable items hitting the upper end of its £17.2bn–£17.6bn forecast. Net interest margin came in at 247 basis points, or 2.47%—reflecting the spread between lending income and what the bank pays out on deposits and funding.
Still, management steered clear of sounding reckless. CEO Paul Thwaite pointed to “positive momentum” in the first quarter, but flagged that the external environment had “more challenging” dynamics. NatWest logged attributable profit of £1.4bn, earnings per share at 17.9p, and return on tangible equity came in at 18.2%—that’s profit on shareholder capital minus intangibles. NatWest Group
Bulls have more than a scrap to work with. First-quarter numbers showed both loans and deposits headed higher, while the core equity tier 1 ratio—the key capital guardrail—landed at 14.3%. Cost-to-income got leaner, dropping to 46.5%. Toss in Fitch’s upgrade and a dividend yield circling 5.8%, and those betting on NatWest point to a sturdy capital position, solid earnings, and ongoing rate leverage as fuel for more cash returns.
The bear case follows. Margins benefit from higher rates, but only up to the point where borrowers start to hurt, mortgage pricing tightens, or the tax bill climbs. NatWest took a £283m impairment charge—funds reserved for potentially sour loans—with £140m of that linked to downgraded macro assumptions. Notably, AJ Bell pointed out that even the upper bound of the £17.2bn–£17.6bn income range falls short of the company-compiled consensus figure of £17.96bn.
The sector move is pulling names together: Lloyds lost 4.35% Tuesday, Barclays slipped 3.31%, and NatWest shed 3.2%—not standing out on ratings, just grouped in with the rest of the domestic banks. Investors are treating UK lenders as a single trade these days. It’s not just about loan books or deposit flows; politics, tax, and Westminster’s borrowing costs are all weighing.
NatWest’s long-term play against rate risk is Evelyn Partners. That £2.7bn acquisition is pitched as a way to build the top private banking and wealth outfit in the UK, boost fee income, and push total assets under management and administration up to roughly £127bn. There’s a catch, though: the deal comes with a capital hit. NatWest flagged a roughly 130 basis point reduction to its CET1 ratio, and when the deal surfaced, Jefferies highlighted a serious valuation risk, according to Reuters.
This chart isn’t arguing that NatWest has lost its underlying momentum. What it does show: even a well-capitalized lender can see its shares slide if investors get spooked by growing political risk around UK banks. For the next decisive shift, the market is likely looking for one of three cues—gilts settling down, clarity on bank taxes, or hard evidence that credit quality is weathering elevated rates.
