NatWest Group (LSE:NWG) Stock Q3 Earnings Put Valuation In Focus

NatWest Group stock closed Q3 earnings day at £5.80, after a choppy few weeks where the share price slipped about 20% over 90 days. That short term hit jars with the headline numbers just reported for the quarter, including £1,450m of net income and a cost to income ratio of 45.1% that points to tight control of the day to day banking machine.

Step back from today’s price flicker and a different picture emerges. Over the last year, trailing basic earnings per share of roughly £0.74 and a P/E of 7.6x sit against a sector trading on higher multiples. That comparison is where the multi year debate on NatWest really starts.

Love NatWest Group’s tight cost control but worried the low P/E is a value trap rather than a bargain? Benchmark that concern against our 14 high quality undervalued stocks to see how this bank lines up on quality and valuation.

Q3 2026 Earnings Summary

• Total Revenue (Q3 2026 vs Q3 2025): £4,363m vs. £4,179m (up about 4%)
• Net Income (Excl. Extra Items, Q3 2026 vs Q3 2025): £1,450m vs. £1,516m (down about 4%)
• Basic EPS (Q3 2026 vs Q3 2025): £0.193 vs. £0.198 (slipped about 3%)
• Cost to Income Ratio (Q3 2026 vs Q3 2025): 45.1% vs. 45.8% (slightly more efficient)

NatWest is guiding to over £1bn more hedge income next year. Ask Charlie what NatWest expects from its hedge income surge.

NatWest bullish story: fee and AI milestones tested

Supporters argue NatWest can lean on wealth, payments and AI to make earnings less sensitive to lending spreads and keep efficiency tight.

"Completion of the Evelyn Partners acquisition at the end of June 2026, which more than doubled NatWest Group assets under management and administration to £131b and is expected to lift group fee income by about 20%, sets up a larger mix of capital light, recurring revenue that could support earnings resilience relative to pure interest income."

Q3 now shows £132.4b of AUM/A with management saying Evelyn integration is on track. Income growth of about 4% year on year, alongside a 45.1% cost to income ratio and RoTE around 20%, indicates this mix shift and AI driven savings are at least partially feeding through.

NatWest bear case: margin and funding risks under the microscope

Sceptics focus on whether loan growth, funding mix and pricing pressure eventually bite into NatWest Group returns.

"Loan growth is currently running ahead of deposit growth, with quarterly gross loans increasing by £9.7b compared with deposits increasing by £2.8b and the loan to deposit ratio rising to around 92%. The need for more wholesale funding such as covered bonds could increase funding costs and weigh on net margins and capital generation if this pattern continues."

Latest figures show loans to deposits around 90%, with management highlighting only selective wholesale issuance so far. Net interest margin is guided as broadly stable into 2027 with extra hedge income, and CET1 still sits at 13.5% after distributions, so this risk is present but not yet eroding capital generation in the reported numbers.

One Narrative disagrees with today's price. → See where this Narrative says NatWest Group should trade.

Hunt Quiet Disconnects In Plain Sight

NatWest Group just showed how a tidy quarter and a jumpy share price can tell two very different stories. The real opportunity could sit in stocks that look mispriced before expectations catch up.

• Company 1 - 29% below our estimate - uses a fully funded balance sheet to advance delayed copper projects toward higher output and additional by product revenue.
• Company 2 - 35% below our estimate - extends its IT infrastructure playbook into AI focused and US contracts by integrating a concentrated customer base from recent acquisitions.
• Company 3 - 27% below our estimate - converts a long dated defense order book into higher margin work as problem divisions resolve delivery issues on complex sensing and communications programs.

Those are three of them. See all 14 potentially undervalued companies →

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