NatWest, trading as Royal Bank of Scotland north of the border, has posted a rise in half-year profit, raised its dividend and upgraded its guidance.

Attributable profit for the six months to the end of June rose 18.5% to £2.488 billion against £2bn last year. Operating profit before tax came in at £3.6bn, up 18.4% from £3bn.

It has declared an interim dividend of 9.5p a share, 58% higher than a year ago, while it intends to buy back £750 million of shares in the second half.

A net impairment charge of £193 million in the second quarter included £81m on the acquisition of balances from Sainsbury’s Bank.

The cost-to-income ratio, which compares operating costs with income, improved to 48.8% from 55.5% last year, helped by investment in technology and efforts to simplify operations.

The figures are the first since the bank was returned to full private ownership following the sale of the government’s stake.

Chief Executive, Paul Thwaite, said:  “NatWest Group’s strong performance in the first half of the year reflects our consistent support for our customers and, in turn, delivery for our shareholders.

“We have today upgraded our income and returns guidance for 2025, as well as announcing a 9.5p interim dividend and a £750 million share buyback.

“The role we play as a trusted partner to over 20 million customers is fundamental to our strategy and we continue to focus on helping them achieve their ambitions, with lending, deposits and assets under management once again increasing in H1 2025.

“With positive momentum in our business, we are ambitious for the future and see clear opportunities for further disciplined growth.

“This is complemented by our focus on bank-wide simplification, as we quietly revolutionise how we operate, enhancing our tech and AI capabilities in order to better meet and anticipate the evolving needs of our customers.

“Having returned to full private ownership in Q2 2025, NatWest Group is well placed to step up and play its part in supporting economic growth across the UK and, in doing so, to create sustainable value for all our stakeholders.”

Shares in the bank which stood at from 400.30p at the start of the year surged 17.6p (3.51%) to close at 519p.

Market reaction

Nick Sherrard, managing director of Label Sessions, said: “NatWest has done a lot to break links with the past – and the results of that turnaround are increasingly coming through in positive results. That said, while the government may have finally exited its stake, the fact that nobody can quite forget the crisis era is surely the reason we don’t celebrate the transformation of this business more.

“NatWest is making big bets on AI through partnerships with OpenAI and AWS. The bank’s moves in embedded finance are also innovative, and you can see how innovation in technology and proposition at NatWest is joined up. There seems to be a real vision for the future, but executing on that strategy will not be easy.

“If NatWest can continue to build the future while delivering on what it needs to in the here and now, then we may see the bank in good headlines long enough to forget about the old ones.”

Zoe Gillespie, wealth manager at RBC Brewin Dolphin, said: “NatWest has posted another strong set of results, beating forecasts again as the bank’s turnaround really takes hold. Its strategy of simplification, cost reduction, and technology integration – combined with sensible bolt-on acquisitions – is driving income growth and greater profitability. 

“The addition of Sainsbury’s Bank, in particular, provides a real platform for further growth in UK retail banking. Now fully in private ownership, NatWest has a freer hand to make its next big strategic move and, in the interim, shareholders are being well rewarded for their patience with a sizeable dividend increase and share buyback programme.”

Chris Beauchamp, chief market analyst at global trading and investing platform IG, said:” “These numbers seem to amply justify NatWest’s share price rally over the last year, one of the most impressive risers on the FTSE 100 in recent months.

“The Sainsbury’s bank acquisition has helped boost its market share, but perhaps investors will wonder now where the next round of growth will come from.”

AJ Bell investment director Russ Mould, said: “Unlike its peer Lloyds, which beat expectations but failed to lift guidance, NatWest has ticked both these boxes while announcing second-quarter numbers A significant increase in the dividend and a further £750 million buyback gave shareholders further reason for cheer.

“Having returned to full private ownership the stabilisers are off for the group and management may now push hard on the pedals, with further acquisitions potentially on the horizon after the recent capture of Sainsbury’s Bank – which has delivered a meaningful bump in customer numbers.

“The market will be wary of NatWest becoming too aggressive on this front given its history and the danger of unpicking progress in returning the bank into a profitable and cash generative operation.

“NatWest has focused on growing parts of the business less dependent on interest rates, including its wealth management arm, and to simplify the company’s structure. It has also benefited from the Bank of England cutting rates more slowly than anticipated.

“The strong returns could come under scrutiny; with speculation the government is considering a raid on the banking sector to bolster strained public finances.”