NatWest Group PLC

The stable outlook indicates that we expect NatWest's credit profile to remain robust over our two-year horizon. We anticipate that its earnings will strengthen in line with management's guidance and it will maintain solid funding and liquidity profiles. Loan arrears and defaults are likely to increase from the current benign levels, but we do not foresee a material deterioration. Consistent with the CET1 ratio trajectory, we anticipate that our risk-adjusted capital (RAC) ratio will fall to 9.5%-10.0% at year-end 2024. We could raise the ratings during our two-year outlook horizon if economic and geopolitical conditions stabilize and NatWest demonstrates a sustained competitive advantage in line with higher-rated global peers, continued stability in strategy, and healthy, consistent earnings generation. We could

...NatWest's franchise is anchored by its domestic business. NatWest is one of the leading competitors in U.K. retail and commercial banking, which contributes the majority of its revenues and earnings. NatWest is well advanced in reshaping its business model and cost base. NatWest continues to manage down its cost base and expects 3% annual reductions in 2022-2023 despite ongoing business investment, particularly in technology. Its phased, capital-accretive withdrawal from Ireland is on track, and it expects the majority of assets to be sold by year-end 2022. The targeted downsizing of the capital markets business is largely complete and the division's priority is generating stronger and more consistent revenue. Rising interest rates are a tailwind to earnings. Like U.K. peers, rising interest rates benefit NatWest's revenue from its deposits and structural hedge, partly offset by strong mortgage market competition. It expects a return on tangible equity (RoTE) comfortably above 10% in 2023,...

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