London, May 13, 2026, 12:03 BST
- NatWest was quoted around 557–560p, giving back an open at 572.8p after Tuesday’s 3.2% slide to 562.8p.
- Fitch’s upgrade of key NatWest subsidiaries helped the credit story, but the share move is still being driven by UK political risk, gilt stress and bank-tax fears.
- Bulls point to stronger income guidance, an 18.2% first-quarter return on tangible equity and higher-for-longer rates. Bears answer with credit provisions, mortgage margin pressure and the risk of a higher UK bank surcharge.
NatWest Group’s London shares were not fading on a bad earnings update. They were fading because a clean credit positive ran into a bigger macro trade. Delayed price services showed the stock around 557–560p, after an open at 572.8p and after Tuesday’s close at 562.8p.
The positive was Fitch. NatWest said the agency upgraded long-term issuer default ratings and senior unsecured debt ratings for several operating subsidiaries, including National Westminster Bank and Royal Bank of Scotland, to AA from AA-, with stable outlooks. Alliance News, carried by AJ Bell, said the shares rose 1.0% to 564.8p in Wednesday morning trade, but that early lift did not settle the broader argument.
Why it matters: the upgrade is more useful for funding confidence than for today’s equity tape. A stronger rating can help a bank defend access to wholesale funding, but stock investors are asking a harsher question: will profits survive a UK political reset, possible bank-tax rises and gilt yields above 5%? Gilts are UK government bonds, and their yields feed straight into bank valuations, mortgage pricing and the economy’s cost of money.
Tuesday set the tone. Reuters reported that long-term UK borrowing costs hit their highest levels in nearly 30 years as investors worried a change of leadership could loosen fiscal discipline. Barclays, NatWest and Lloyds all fell more than 3%, and JPMorgan analysts said they expected the UK banking surcharge to rise to 5% from 3% if policy shifts left.
The political risk did not clear overnight. Sterling slipped again on Wednesday as Starmer resisted calls to resign, and Peel Hunt chief economist Kallum Pickering called the setup a “summer of severe political uncertainty.” That matters for NatWest because a domestically exposed bank can become a quick proxy for UK fiscal credibility. Reuters
Prediction markets show why traders are not treating this as noise. Polymarket put Starmer leaving by June 30 at 45% and by December 31 at 72%, while its June Bank of England market showed an 83% probability of no rate change and an 18% probability of a quarter-point increase. A separate Polymarket contract put the chance of a Bank of England rate hike at some point in 2026 at 65%; the Bank itself last held Bank Rate at 3.75% by an 8–1 vote.
That rate debate sits at the centre of NatWest’s investment case. On the first-quarter call, CFO Katie Murray said the bank’s 2026 guidance now assumes Bank Rate stays at 3.75% this year, rather than falling to 3.25%, and NatWest expects income excluding notable items to land at the top end of its £17.2bn–£17.6bn range. Net interest margin — the spread between what a bank earns on lending and pays for deposits and funding — was 247 basis points, or 2.47%.
Management’s tone was not careless, though. CEO Paul Thwaite said the first quarter showed “positive momentum,” but also said the external environment had become “more challenging.” NatWest reported £1.4bn of attributable profit, earnings per share of 17.9p and an 18.2% return on tangible equity, a measure of profit earned on shareholder capital after stripping out intangible assets. NatWest Group
The bull case is not thin. Loans and deposits both rose in the first quarter, the core equity tier 1 ratio — the main bank capital buffer — stood at 14.3%, and the cost-to-income ratio improved to 46.5%. Add the Fitch upgrade and a dividend yield quoted near 5.8%, and optimists can argue NatWest still has the capital, earnings base and rate leverage to keep returning cash.
The bear case lands right after it. Higher rates help margins until borrowers strain, mortgage pricing gets tougher or the tax take rises. NatWest booked a £283m impairment charge — money set aside for loans that may go bad — including £140m tied to weaker macro assumptions, and AJ Bell noted that even the top end of the £17.2bn–£17.6bn income guide sat below company-compiled consensus of £17.96bn.
Peers explain the sector read-through. Lloyds fell 4.35% on Tuesday and Barclays dropped 3.31%, while NatWest’s 3.2% fall put it in the same domestic-bank basket rather than a stand-alone ratings story. The market is trading UK banks as a block because the risk is not only loan growth or deposits; it is also Westminster, tax and the cost of government borrowing.
NatWest does have a longer-run answer to rate dependence: Evelyn Partners. The £2.7bn deal is meant to create the UK’s leading private banking and wealth management business, lift fee income and bring combined assets under management and administration to about £127bn. But the same deal also carries a capital cost: NatWest said it would reduce the CET1 ratio by about 130 basis points, and Reuters reported that Jefferies saw a hefty valuation risk when the deal was announced.
So today’s chart is not saying NatWest has lost its operating story. It is saying a strong bank can still trade lower when the market raises the political risk premium on UK lenders. The next clean move probably needs one of three things: calmer gilt trading, clearer signals on bank taxation, or firmer proof that credit quality is holding while rates stay high.
