NatWest Group (NYSE:NWG) reported third-quarter financial results on Friday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
NatWest Group reported strong Q3 2026 financial results, with customer assets and liabilities growing by 14.2%, surpassing the target of over 4%.
The company achieved a return on tangible equity of 21.6%, with an operating profit of £2.2 billion and profit attributable to shareholders at £1.5 billion.
Income grew 3.1% to £4.6 billion, while operating costs increased by 2.8% to £2.1 billion, resulting in a further improved cost/income ratio of 45.1%.
Assets under management and administration doubled to £132 billion, bolstered by the acquisition of Evelyn Partners.
NatWest Group continues to focus on disciplined growth, simplification, and capital management, expecting to generate over 200 basis points of capital for the third consecutive year.
The company maintains a strong capital position with a CET1 ratio of 13.5% and expects capital generation before distributions and the impact of Evelyn Partners to exceed 240 basis points in 2026.
Guidance remains unchanged, with a positive outlook on income growth in 2027 driven by balance sheet growth and a strong structural hedge.
Management expressed confidence in sustaining loan growth, driven by strong demand in corporate lending and mortgage sectors, while maintaining a stable net interest margin.
Full Transcript
OPERATOR
Good morning and welcome to NatWest Group’s Q3 2026 results management presentation. Today’s presentation will be hosted by CEO Paul Thwaite and CFO Katie Murray. After the presentation, we will take questions.
Paul Thwaite (Chief Executive Officer)
And thank you for joining us today. I’ll start with a short introduction. Katie will take you through our quarter financial performance and then we’ll open up for questions. As I said at the half year, we are building a diversified business that benefits from structural growth drivers so that we can deliver strong returns on a sustainable basis. Our track record demonstrates the success of our strategy with three clear priorities driving our performance.
First, disciplined growth. Our three businesses are working in collaboration to drive sustained momentum across the Group. This marks the eighth consecutive year in which we expect to deliver growth in customer assets and liabilities of more than 4%. Second, we continue to increase our operating leverage through simplification. This gives us a significant competitive advantage as the most efficient large bank in the UK. Third, as we actively manage capital and risk, we expect to generate more than 200 basis points of capital for the third year running in 2026. This gives us the flexibility to continue to invest in our business, support customers and deliver attractive returns to shareholders.
In short, by driving disciplined growth, leveraging simplification and actively managing capital and risk, we are delivering industry-leading returns with an average return on tangible equity of more than 17% over the past four years. Our third quarter continued this strong momentum. So let me turn to the headlines. Customer assets and liabilities grew 14.2%, well above our target of more than 4%. Within this, customer lending grew 7.7%. This growth was disciplined and broad-based across all three of our businesses, with a strong performance in Commercial and Institutional driven by infrastructure, renewables, housing and technology. Growth in Retail and Private Banking was driven mainly by mortgage lending, which increased 4% or £8.3 billion as we grew our stock share from 12.5% to 12.7% over the first nine months.
Customer deposits grew 4.3% in a competitive market. This reflects further growth in current accounts as well as operational balances that bring strong relationship and liquidity value. In Retail Banking, we are delivering on our strategy of growing savings with the launch of new Easy Access products and channels. There was also good growth from mid to large groups. Assets under management and administration more than doubled to £132 billion, supported by our acquisition of Evelyn Partners. This includes new flows of £1 billion since the deal completed at the end of June. With positive flows in both businesses, we’re excited about the growth opportunity that Evelyn Partners represents for the Group. The integration is on track and we look forward to providing further insight into Private Banking and Wealth Management at our Spotlight in November.
We continue to increase operating leverage with income growth of 9.3%, well ahead of cost growth of 4.8% and with a cost/income ratio of 45.7%, down 2.1 percentage points. As we move towards our 2028 target, continued growth, strong operating leverage and a low cost of risk have resulted in earnings per share of 57.4 pence, up 13.2%, and a 9.4% uplift in TNAV per share. Excluding Evelyn Partners, we generated high levels of capital at 208 basis points.
The balance sheet is strong with a capital ratio of 13.5% and our return on tangible equity remains industry leading at 20.2%. With that, I’d like to hand over to Katie to take you through the results.
Katie Murray (Chief Financial Officer)
Thank you, Paul. I’ll cover the third quarter using the second quarter as a comparator. Our third quarter performance was driven by broad-based growth, driving sustained income momentum and continued high returns. Income excluding notable items increased 3.1% to £4.6 billion and total operating costs grew 2.8% to £2.1 billion, with the cost/income ratio improving further to 45.1%. The impairment charge was £277 million, equivalent to 24 basis points of loans.
This resulted in operating profit of £2.2 billion. Profit attributable to ordinary shareholders was £1.5 billion and we delivered a return on tangible equity of 21.6%. Turning now to income, income excluding notable items grew 3.1% to £4.6 billion as a result of growth in customer assets and liabilities, or CAL, higher non-interest income from the inclusion of Evelyn Partners, and an extra day in the quarter. Net interest margin was broadly stable at 250 basis points in line with our expectations as deposit margin expansion was offset by ongoing mortgage repricing, lending mix, and a regular annual review of customer repayment habits.
Non-interest income grew 7.9% or six times, supported by the inclusion of Evelyn Partners and a gain on the sale of our SME consultancy business Mentor. This was partly offset by the non-repeat of accelerated insurance income in Retail Banking in the second quarter. We now expect the Bank of England base rate to increase to 4% in the fourth quarter. As you are aware, given the lateness in the year, the resulting benefit in 2026 will be modest, and we continue to expect full-year income excluding notable items of around £17.9 billion.
Turning now to CAL, we continue to deliver a strong performance across our three businesses. CAL increased by £15.7 billion in the quarter, or 1.6%. This comprises £8.1 billion of broad-based customer lending growth, £5.8 billion of customer deposit growth and a £1.8 billion increase in assets under management and administration. I’ll touch on each of these elements in turn. Strong loan growth of £8.1 billion was broad-based. Retail Banking and Private Banking & Wealth Management balances grew £1.5 billion, or 0.6%. This included £1.1 billion in mortgages and £300 million in unsecured lending. Our mortgage stock share remained stable in the quarter at 12.7%. Commercial and Institutional grew fastest at 4% or £6.6 billion. This was driven by Corporate & Institutions, where higher infrastructure and renewables lending was supported by structural growth trends such as digitization and decarbonization.
There was also healthy demand in Commercial mid-markets from sectors such as commercial real estate, manufacturing and social housing. Turning now to deposits, customer deposits growth of £5.8 billion was well balanced across both personal and corporate customers. Retail Banking deposits grew £3.1 billion as we attracted savings from the launch of new products and channels. There was continued modest sequential growth in current accounts. In Commercial, Institutional deposits increased by £3 billion with growth across both Commercial mid-market and large corporates. Our deposit mix remains broadly stable, with a slight increase in term deposits now representing around 19% of the total.
Turning now to assets under management. Assets under management and administration closed the quarter at £132.4 billion, an increase of £1.8 billion. This includes net inflows to assets under management of £1 billion, assets under administration net flows of £0.4 billion, and positive market performance of £0.4 billion. The net inflows of £1 billion are equivalent to 3.4% of opening AUM on an annualised basis and were positive in both businesses.
Turning now to costs. We are pleased with further improvement in operating leverage in the quarter as we grew income faster than costs. Other operating expenses of £2.1 billion take the total for the first nine months to £6.2 billion. We delivered £420 million of gross cost savings year on year, giving us capacity to continue investing in the business. These savings partly offset increased investment spend, the inclusion of Evelyn Partners and higher people-related expenses, including our annual pay reward.
As you heard from Paul, our cost/income ratio reduced by 2.1 percentage points to 45.7%. We continue to expect around £300 million of cost from the Evelyn Partners acquisition this year and have incurred £156 million to date. Overall, we continue to expect other operating expenses of around £8.5 billion for the full year. Turning now to impairments, customers continue to demonstrate resilience and our credit performance remains strong. Our growth is being delivered with a consistent risk appetite, supporting a structurally low loan impairment rate. The impairment charge for the quarter was £277 million, equivalent to 24 basis points of loans on an annualised basis. This brings the charge for the first nine months to 21 basis points, in line with our full-year guidance of below 25 basis points.
The increase relative to the second quarter was driven by the non-repeat of releases in the retail portfolios. We carry economic uncertainty post model adjustments of £288 million, with total PMAs of £350 million. Turning now to capital, our disciplined approach to capital allocation supports strong and sustainable capital generation going forward. We ended the third quarter with a common equity tier 1 ratio of 14.7% before distributions. 142 basis points of capital was invested in our acquisition of Evelyn Partners, and as you know this is a highly capital generative business. We generated 288 basis points through strong earnings, which was boosted by 47 basis points from RWA management.
Our ongoing investment spend consumed 30 basis points and organic lending growth absorbed 96 basis points. We are reporting a CET1 ratio of 13.5% after accruing 50% of attributable profit towards the final ordinary dividend, and we continue to expect capital generation before distributions and the impact of Evelyn Partners of more than 240 basis points in 2026. We ended the quarter with £200 billion of risk-weighted assets, including some positive CRD IV model updates in our retail portfolios.
Turning now to our CET1 requirements, as you know we continue to target a CET1 ratio of around 13%. We can confirm today that our Pillar 2A requirements will be reduced by 76 basis points as of January 1st, including Basel 3.1 offsets. 43 basis points of this relates to our CET1 requirement, taking our supervisory minimum from 11.6% to 11.1%. This was expected. We took it into account when we changed our CET1 target to around 13%. Our total capital and CET1 ratios both remain strong and comfortably above minimum requirements.
Turning now to guidance, our 2026 guidance remains unchanged with one enhancement. We now expect risk-weighted assets of around £210 billion as at 1 January 2027. This takes into account Basel 3.1 and CRD IV impacts as well as other movements such as anticipated growth and operational risk. In the fourth quarter, we will continue to operate with a CET1 ratio of around 13%. And as we told you in July, we expect to announce our next buyback with our full-year results in February.
And with that, we’ll now open for questions.
OPERATOR
If you’d like to ask a question today, you may do so using the raise hand function on the Zoom app. If you’re dialing in by phone, you can press star nine to raise your hand and star six to unmute. Once prompted, we ask that questions are limited to two per person to allow an opportunity for more people to ask questions. We’re going to pause for a moment to give everyone an opportunity to signal for questions. Our first question today is going to come from Alvaro of Morgan Stanley.
Alvaro, if you’d like to unmute and ask your question.
Paul Thwaite (Chief Executive Officer)
Hey, Alvaro. Good morning, Alvaro.
Alvaro (Analyst at Morgan Stanley)
Good morning. Hopefully you can hear me okay.
OPERATOR
Clear. We can hear you. Clear.
Alvaro (Analyst at Morgan Stanley)
Thanks for taking my question. The first question is, sort of on—it’s kind of the NII outlook, but obviously I know you’re not going to give guidance for 27. But the volume growth, lending growth continues very strong. I assume that you expect that to continue and more think about the funding of that loan growth and, as you see it evolving going forward, deposit competition and deposit growth, and how much of that strong loan growth is actually going to feed into extra NII growth.
Because when I think about the structural hedge, this obviously has a lot of tailwinds. But I wonder if the competitive dynamics of funding that loan growth will sort of mitigate or sort of hold back NII growth as we think about the NII going forward. So maybe some color—if you don’t give us guidance—some color as to what to expect from those moving parts in terms of competitive pressures eating up the hedge upside. And then on capital, I know your comments, Katie, on the 13% was taking already into account the reduction of P2A, but there is obviously—the buffers have been reviewed, making them more flexible, encouraging the banks to use less management buffer. Have you taken that into account, or could that give you extra flexibility next year when they firm up the proposal? Firmed up. Thank you.
Paul Thwaite (Chief Executive Officer)
Thanks, Alvaro. Okay, Katie,
Katie Murray (Chief Financial Officer)
Perfect, thanks. Morning, Alvaro, good to hear from you. So, quite a lot in those two questions there, so I’ll kind of take you through a few different bits. First of all, if you look at income in 2027, we remain on track to deliver income ex-notables of around 17.9 billion in 2026, so that’s an increase of over 9% year on year. And you’re absolutely right, I’m not going to give you specific 2027 income guidance today, but I can share how we are thinking about the drivers. So first, we are confident that we’ll continue to deliver strong customer balance growth in line with our greater than 4% CAGR growth.
And on the bank CAGR growth, we know that it supports both NII and non-interest income growth, including the AUMA income from our large and growing PPWM business. Secondly, we continue to expect income from the structural hedge to be more than 1 billion higher in 2027 versus 2026. That will contribute over 7 billion into the income line. We’ve got a high degree of confidence on that outcome given that already three-quarters of that hedge has been locked in, and the higher reinvestment yields in 2026 have underpinned that confidence.
And finally, our current expectations of the mix of balance sheet growth across loans, deposits and wholesale funding does mean that margin continues to be broadly stable through 2027. We don’t assume any further changes in the Bank Rate during the year; we’re expecting it to remain at 4% throughout 2027 and that five-year swap rate to moderate to a 4% average for 2027 as well. But you can be confident in the ongoing income growth in ’27 and beyond driven by balance sheet growth and the strength of the hedge.
And obviously when we talk in February, we’ll talk more about where we might land in terms of actual numbers. If I then jump onto funding and liquidity, look, we’re pleased with what we’ve delivered in terms of the really strong, broad-based loan growth. In Q3, you can see the balances were up 2% or 8 billion over the quarter and 6.4% year to date. We also saw strong deposit growth at 1.3%. And you can see that, like the rest of the industry, we are seeing that lending growth is outpacing deposit growth. To date, we’ve utilised our surplus deposit liquidity with minimal wholesale funding issuance to meet customer demands.
With a loan-to-deposit ratio of 90% at the end of the quarter, we benefit from a strong liquidity position, strong deposit franchises, with the flexibility to access diverse funding sources across deposits and wholesale funding markets as well. And what we’re really seeking to do there is to manage both the lifetime value of our customers and also their liquidity value. You’re really making me work hard this morning for your two questions. If I jump onto capital and where we are there, we did announce today our P2A requirement will be reduced by 43 bps on January 1, including the Basel 3.1 offset. So that takes our supervisory minimum from 11.6% to 11.1%. This was expected, you know, and we took it into account when we changed our CET1 target to around 13%. I would say it’s one part of the regulatory change, a step in the right direction.
We do await the next capital update in the Financial Stability Report on November 2026. We continue to engage very constructively with the PRA on the case for reducing overlaps for domestic exposures. So I would say let’s see what’s announced and then we will take stock.
Paul Thwaite (Chief Executive Officer)
Great. Thank you, Katie. Thanks, Alvaro.
OPERATOR
Our next question comes from Chris Kant of Autonomous. Chris, if you’d like to unmute and ask your question. Hey, Chris. Hey, Chris. Chris, are you there? Can’t currently hear you, Chris, Problem with his buttons this morning. We’re going to move on and come back to Chris in a moment. We’re going to go on to Benjamin Toms of RBC. Benjamin, if you’d like to unmute and ask your question. Hey, Ben. Hey, Ben.
Benjamin Toms (Analyst at RBC Capital Markets)
Hey. Morning. Thank you very much for taking my question. I just want to pick up on something you said about stable NIM going into ’27. Please clarify that’s stable versus the Q4 exit rate, whatever that might be. And then, secondly, one-off gain in your other income, I don’t think you class that as a notable. Can you help us quantify that to help with our run-rate modelling? And mortgages continue to grow strongly in the quarter. What do you expect for mortgage growth from here?
You’ve got Your First Home coming in the spring. Do you think that can lead to a loan demand over the next six months with first-time buyers making up 25% of volumes? Thank you.
Katie Murray (Chief Financial Officer)
Perfect. So if I look at NIM, simple answer is yes, I am thinking specifically yes. We said we expect NIM flatter in H2, so many of those drivers are continuing into 2027. And I guess as I kind of think of the drivers, you know, Ben, there’s three things: lending margins—we continue to expect growth weighted towards lower-risk, lower-margin, attractive-returns lending business—and for the front- and back-book mortgage margins to align by the end of 2026.
On deposit margins, we see expansion driven by the ongoing tailwind of the structural hedge, with over another billion of higher hedge income in 2027 than 2026. It’s going to obviously be offset by mix and funding, and that’s going to be impacted in terms of the increased wholesale funding. On interest rates, in my last answer I said, you know, 4% for the year holding stable as we go out, and that five-year swap rate moderating to that 4% as well.
Let’s see how that goes. I do think we need to think a little bit about what that means for customer sentiment and credit demand, but we are really comfortable in terms of growth. And that together brings us to the kind of broadly flat that we’ve talked about. In terms of the one-off in income, it was the sale of our Mentor business. It’s a small SME consultancy business, and it’s in the tens of millions, that gain. If I then jump over onto mortgages. So it’s been another good quarter of mortgage growth—balances up £1.1 billion, or half a percent, in Q3. That’s 3.9% up for the whole year at £8.3 billion for the first nine months. Our market share has remained stable in the quarter, 12.7%. That’s up from 12.5% at the start of the year. It’s our ninth consecutive quarter of net mortgage growth. We’ve got a healthy pipeline into Q4. At the kind of market level, we can see that Q3 applications were 9% higher than Q2.
You’ve got modest declines happening in house purchase numbers—and you’ve all seen that in the Bank of England data—but that’s been offset by higher remortgage activity, and especially during the period of rate volatility that we saw in September. As you know, we remain very dynamic and disciplined in our pricing throughout the period. You know the book margin continues to be impacted by the roll-off of the higher-margin five-year fixed mortgages as well as the behavioural life adjustment that you saw come through in income as well.
We guided you previously to the sector around 60 basis points for the year—no change in that guidance. As we move forward from here, if we look forward, mortgage rates remain materially above 5%. There might be a little bit of a drag on house purchase lending, with a bit of a mix shift towards remortgages, and I think we’ll see what the government’s new Your First Home scheme, which was announced in the budget this week—I think it’ll be supportive overall. While the impact will be modest for the market overall, we’re positive about it. I would say overall we’re really pleased with mortgages and the continuing growth that we’re seeing in this area.
We expect it to continue to grow, of course at appropriate rates of return for us. Thanks very much, Ben.
OPERATOR
Thank you, Katie. Thanks, Ben. We’re going to come back to Chris Kant of Autonomous. Chris, if you’d like to unmute and ask your question. Hey, Chris.
Chris Kant (Analyst at Autonomous Research)
Hello, can you hear me?
OPERATOR
Yep, second time lucky. We’ve got you.
Chris Kant (Analyst at Autonomous Research)
They seem to now have three separate toggles between browser, headset, and the button on the website to play around with. So I apologize.
OPERATOR
Almost too much information, Chris.
Chris Kant (Analyst at Autonomous Research)
Could I just come back on the capital and one on rates looking into next year, please? So, in terms of thinking about the capital target, obviously we knew P2A was going to come down—a bit better than I expected—but ballpark O-SII releasability is obviously a new development during the course of this year. So if you didn’t get any further reduction in MDA, but the Bank of England does follow through, are you going to respond there in terms of the target management buffer?
They’re doing that to try to encourage banks to run with buffers. It’s quite a material change in terms of your MDA being sort of 3% flexible under severe stress. So if you could comment on how you’re thinking about that—that presumably wasn’t factored in when you set the 13. And on international competitiveness, which is something the Chancellor called out in his letter to the FPC this week, is there anything on your shopping list there beyond overlaps? I know the Bank of England talked about that last year, but it felt like maybe there’s something broader going on. So is there anything you think is particularly penal in the UK framework?
And then the final thing is on rate sensitivity looking into next year. I understand you’ve given us your rate assumptions. Quite a few European banks, broadly this quarter, talking about deposit competition all of a sudden, and I can’t help but think that maybe partly this is about management teams trying to discourage analysts from taking state activities and sort of truing up previous guidance. So in terms of your own rate sensitivity, looking into next year—you’re planning flat NIM, 4% rates, 4% swap rates—that’s not where rates markets are.
Do you still believe the sensitivity disclosures you give us? If the rate outcome is different, is that still a reasonable basis for us to be thinking about adjusting your spreadsheet when we model our own spreadsheets? Thank you.
Paul Thwaite (Chief Executive Officer)
Okay, so, Katie, do you want to go with the kind of the narrow question on capital? I’ll talk a little bit about international competitiveness and then we go for rates.
Katie Murray (Chief Financial Officer)
I do capital and rates together and then get back to you? Let me kick off on capital. On capital. Perfect. So if we, if I look at capital, look, it’s a relatively kind of simpler sort of answer. You know, the buffer usability is relevant in sustainability, systemic stress rather than idiosyncratic stress, and we obviously manage for both. So for us, the most important is that it’s fallen to 11.1%, reflecting our strong and leading performance in the UK bank stress test that we saw last year.
We are looking and we’re looking to see what the FCR comes out with next month and then we will take stock at that point.
Paul Thwaite (Chief Executive Officer)
And then, Chris, on the broader question around, I guess, international competitiveness around the framework, four things I’d quickly call out where we think there are opportunities to calibrate the framework in a better way. First would be the kind of countercyclical capital buffer to bring us more in line with some of the other regulatory jurisdictions. I think that would be a simple and fast way to deliver capital relief. It also maintains the kind of the wider macro flexibility as well.
So that’s the first one. Second opportunity would be that there is a kind of a cumulative capitalization of UK domestic risk. So if you think about the interaction between the countercyclical buffer, the O-SII and the Pillar 2A, the kind of geographic aspect of that can mean that very similar risks are captured in different parts of the framework. So we think that’s worth looking at to make sure it’s pretty proportionate and doesn’t and isn’t disproportionate vis-à-vis the domestic risk.
Then you’ve got, I’d say, the third piece is making sure the risk weights are commensurate with the underlying risk. UK mortgage is a very obvious example, very historical low loss experience. We need to make sure the levels of capital reflect the risk and are proportionate. So there’s kind of different things to look at in the third piece. And then fourth and final, the output floors. Now, output floors inevitably reduce some of the risk sensitivity of the framework.
But as other jurisdictions review their approach, we need to make sure the UK keeps its implementation under review as well, so we don’t see regulatory drift or dissonance. So they’re the four things that from a framework perspective, we think offer opportunities, and they’re about competitiveness, but they’re also in part about resilience as well. So making sure we get the right calibrated framework, which ultimately obviously helps more lending get into the UK economy and, I guess, the wider challenge of growth and returns. Katie, back to you on rates.
Katie Murray (Chief Financial Officer)
Perfect. Sure. Thanks very much. So I mean, Chris, as we look at it, obviously, look, we’re comfortable with the sensitivity we give you is a point-in-time sensitivity. I think there’s other things you need to think about when you’re looking about implications for customer behavior in response to higher rates such as sentiment and lending demand while accepting. We are confident on loan growth within there as well. So we are encouraged by what we see in terms of that lending demand as we go through.
We’ve guided you to 4% for next year and the swap rate moderating over the year. I would say as we looked at, we’ve been reinvesting our product hedge during ’26 at 4.2%. So a little bit higher than that. You know what markets are doing at the moment. It’s kind of difficult to give a number at any specific point. You can take your own kind of view on that, but you’ve got the right tools within which to do that.
OPERATOR
Good. Thank you, Katie, and thank you, Chris. Next we’re going to go to Benjamin Kevin Roberts of Goldman Sachs International. Benjamin, if you’d like to ask your question.
Benjamin Kevin Roberts (Analyst at Goldman Sachs International)
Morning both. Thanks very much for the presentation over taking the questions. So firstly, just a follow-up on some of the helpful NII comments you gave earlier, Katie. So if we zoom out and think about income overall, are there any comments you could give on how you think about the pace of income growth changing in 2027 versus 2026? As you say, you’ve been posting solid volume growth, but mentioned stability in the margins as one of the factors to bear in mind there as well, at least on the NII component.
And then secondly, just on asset quality, are there any comments you could give around the key moving parts you’re seeing under the hood of the business, the impact from higher rates, which bits of the portfolio are more or less resilient right now? Thank you very much.
Katie Murray (Chief Financial Officer)
Sure. Let me start off with asset quality and then I’ll come back to you on the pace of income. So as I look at kind of the asset quality piece, I think you know, Ben, you’re familiar with our book. We remain pleased with the quality of our diversified prime loan book. There’s no significant areas of stress that we see around the three businesses. The impairment charge this quarter, 277, up from 140 in Q2. That’s really a question of kind of non-repeating releases that happened in Q2.
And so actually we see this as a more normalized charge and that’s where we get to the, you know, 21 basis points for the nine months. So well within our kind of guidance as we move forward from there. There was a slightly higher stage 3 charge in Q3 but not anything that I would highlight that I’m overall worried about. Total PMAs are stable in that quarter as well. Small increase in economic uncertainty but like 4 million, really not, not really that relevant.
And we remain confident about our impairment outlook for the remainder of the year and it probably also, you know, guides you. We still have that guidance out with you, the 20 to 30 basis points on impairment through the cycle and we see us very much operating within there. If I look at kind of the pace of income growth, you know, I’ve already spoken about how we think 2027 is not going to be, so I’m not going to go into that much further than I have done already. You can see how the pace of income growth as you look at the quarters has developed through this year. One thing I think you should be mindful of though is the gap that we’ve seen in the growth of our lending and then the growth that we see in our interest-earning assets, which is obviously correlated to the loan growth.
What you’ve seen in 2026 within there is that we’ve utilised a lot of our surplus liquidity. So you’ve seen average interest-earning assets growth at 3% year on year and where that’s well below the kind of 8% growth that we’ve seen coming through on the lending. That’s been positive for NIM in 2026 and, given the closer alignment going forward, means you should expect stronger average interest-earning asset growth and more stable NIM as a result of that.
And that strength comes from the strength you see in the balance sheet growth and it’s very consistent with what we’ve delivered throughout this year. And then I would say that kind of is what’s driving our stable NIM as we go forward from here.
Benjamin Kevin Roberts (Analyst at Goldman Sachs International)
Lovely, thank you very much. Thank you.
OPERATOR
Our next question comes from Shiel Shah of JPMorgan. Shiel, if you’d like to unmute and ask your question.
Paul Thwaite (Chief Executive Officer)
Hey Shiel.
Shiel Shah (Analyst at JPMorgan)
Great, thanks for taking the questions. I’ve got two, please. First on the LCR. So that’s been coming down quarter by quarter. I see what you’re saying in terms of the surplus liquidity being utilized that is driving some of that as well. Where do you think the floor is for this? How do you expect to defend that floor? And should we think about an impact on deposit and funding margins as a result of you trying to defend this floor as well? And then secondly on the corporate momentum, that seems to be broadening out to the mid-market space, which is encouraging. Can I ask about the sustainability of this? You know, whether there were any factors that maybe uplifted that in the third quarter or whether that’s going to be more sustainable going forward and the associated margins, because you’ve talked about mix shift in terms of the corporate side of things driving the pressure, but in terms of sort of pricing pressure, are you seeing any of that come through?
Paul Thwaite (Chief Executive Officer)
Great. Okay. Thanks, Shiel. Katie, why don’t I talk a little bit about corporate lending growth and commercial mid-market lending growth, and you cover LCR?
Katie Murray (Chief Financial Officer)
Sure. Perfect.
Paul Thwaite (Chief Executive Officer)
Yep. So, Shiel, as you rightly point out, another strong quarter from a corporate lending perspective, pleased to see that it’s becoming a repeat delivery really. And to me that speaks to the underlying strength of the commercial and corporate franchise that we’ve got. The lending itself, in my view, is being driven by some quite fundamental structural trends. There won’t be new themes to you: digitization, decarbonization, infrastructure, etc. The reason for mentioning them is that’s what gives us confidence about the sustainability of the lending demand and we can see that in strong pipelines that we’ve got.
I am pleased that the growth is in the mid-market as well as the CIB end. You can see nearly 5 billion up in the mid-market year-to-date, 12 billion up in the large CIB space, relatively flat in the small SME space which is probably what you’d expect given the wider economic environment. And then if you ask ourselves where’s that lending growth coming from and therefore why should we feel confident it’s sustainable? When you get to the detail in the disclosures you’ll see it’s very broad-based: infrastructure, housing, professional services, utilities, tech. So the strength is there across a broad-based set of sectors but also across, as I say, big and large. And when we look at the pipeline ahead of us it looks strong. The pipeline is there, you know, and we’ve kept our appetite very, very consistent and very stable.
So encouraged by the demand. From a mix perspective I would say that the pricing dynamics haven’t changed. Obviously at the top end it’s lower risk weight, lower margin but nicely returning business. In the mid-market, slightly wider margins. That’s always been a competitive space because you’re dealing with impressive mid-market companies who know the value of lending. But we’re not seeing any new specific margin pressure there. But net-net, another good quarter, corporate lending demand.
Very good line of sight on the pipeline and feel very confident we can continue to deliver that looking forward. Katie. LCR.
Katie Murray (Chief Financial Officer)
Perfect. Thanks, Paul. Hi, Shiel. So look, we are seeing a normalization in UK banks’ LCR from the elevated levels that we all saw post COVID, and the same is obviously true for us. We’ve reported an LCR of 137%. There’s no change to our approach on liquidity. Whilst you would expect us to maintain a buffer over the minimum requirement of 100%, we do remain comfortably above that, and we have a broad range of funding options that are available to us.
It’s certainly not anything we see as a constraint to loan growth. As you would expect, we manage our funding and liquidity needs on a dynamic basis, seeking to optimize across the various levers depending on conditions. First of all, we operate a high-quality deposit franchise. We’ve got great flexibility across our multiple brands and property channels to grow deposits where we see attractive and liquidity value. Secondly, we’ve got significant funding flexibility beyond deposits for future loan growth, if that is required. As you’re aware, our non-ring-fenced banks are predominantly wholesale funded, as our retail and corporate deposit franchise sits in the ring-fenced bank.
We’ve had minimal requirements for wholesale funding to date within the ring-fenced bank, which means we’ve got a lot of capacity to access secured wholesale funding markets to support growth when it makes sense to do so. So overall, we remain very well positioned. Strong liquidity position with levers across deposits and wholesale markets. All of that is embedded into our outlook for NIM, which is a function of the growth of the balance sheet that will continue to drive strong top-line growth and support continued operational leverage and sustainable strong returns. Thanks very much, Shiel.
Paul Thwaite (Chief Executive Officer)
Thanks, Gill. Thanks, Katie.
OPERATOR
Next we’re going to go to Aman Rakar of Barclays. Aman, if you’d like to ask your question.
Paul Thwaite (Chief Executive Officer)
Hey, Aman.
Aman Rakar (Analyst at Barclays)
Hey. Hey, Paul. Hey, Katie. Just got a couple of questions, please. So could you just—we’re kind of, you know, a matter of weeks away from the end of the year—could you just help us tighten up NIM into Q4? Your expectations for your share price is clearly very, very, very sensitive to your commentary around forward net interest income and, in particular, your margin expectations for next year—clearly below where the street is. I think you’ve been pretty clear around the trajectory.
But, you know, that jumping-off point for Q4. And if you’re not able to kind of just give us what you think that NIM will be in Q4, which I understand, could you just help us think about the sequential drivers that you’ve laid out in Slide 24—lending margin, deposit margin, and funding and other—kind of directionally what we might anticipate there. And then just coming back to your commentary around your expectations that average interest-earning asset growth might better reflect lending growth in ’27—hopefully I’ve captured that comment right—so then I guess my question is around your view. What’s your kind of take on the sustainability of this loan growth rate? I mean, you’ve grown your loan book at 8% in Q3, I think actually both annualized and year on year. I think we understand that there might be some ease in mortgage momentum, given higher interest rates.
But I’d be really interested to see your take on that lending momentum. Ultimately it’s the volume component to your NIM commentary next year, right. I guess you’ve guided down NIM. Is there a volume offset? Thank you so much.
Paul Thwaite (Chief Executive Officer)
Okay. Do you want to go NIM, a bit of average interest-earning assets?
Katie Murray (Chief Financial Officer)
Yeah, perfect. Okay, great. Yes. In terms of NIM, you know, we previously have said that NIM would be flatter in H2, and I can’t be more precise than that. We don’t manage to NIM. We manage to returns, and you can see the returns that we’ve printed this morning just show the strength of that outcome and that focus on returns. And in terms of kind of interest-earning assets—why—probably to kind of help you a little bit. It’s not a section I send you to very often, but if you go into the financial supplement we’ve given you today, in tab 2.1, you can see what’s happening in the average interest-earning assets by Retail, PBWM, and by C&I. And the reduction we’ve had in that has really been about deposits kind of moving in. That’s all been happening within the central space.
So as you look at them and think about how they might go forward, that’s where I think you might find some help as to why I’ve got such confidence in those interest-earning assets growing. But Paul, shall I hand over to you for the kind of—
Paul Thwaite (Chief Executive Officer)
Hey, Aman. I guess it leads a little bit back to Shiel’s question. From a lending demand and lending confidence and sustainability perspective, we feel very good about the corporate business. You can see our track record there over several years. A) The demand is there. B) It’s geared to areas of specialism and strength. We have infrastructure, housing, and when it’s there we continue to post very strong growth. So we feel good about the commercial and corporate side.
On mortgages, as Katie said earlier, you know, we continue to grow—I think Katie referenced nine quarters in a run for mortgage growth. We’ve shown we can take share; you know, we’ve grown our share this year, but we’ve been thoughtful around pricing, so when the volume is there we can move quickly and take share at the returns we want. So net-net, I guess the message I’m giving you there is we feel confident about our ability to grow on the asset and the lending side, and we’re confident because we’ve got a track record in doing that.
That is the reality of it. Thanks, Aman.
Aman Rakar (Analyst at Barclays)
Can I ask a follow-up, please? I think it’s quite important. So there’s clearly confidence in the outlook for lending growth from here, underpinned by corporate. If you were to sustain loan growth at this cadence, is it right to think that average interest-earning assets would grow at this level? So if hypothetically it was loan growth plus 8 in ’27, should we be thinking about average interest-earning assets plus 8 also, please.
Katie Murray (Chief Financial Officer)
That is what I would kind of guide you to. Growth in average interest-earning assets should now be very much in line with our loan growth. So you’ll see that come through. Yeah, definitely.
Aman Rakar (Analyst at Barclays)
Okay, thank you so much.
Paul Thwaite (Chief Executive Officer)
It’s precise. Thank you. Thanks, Aman.
OPERATOR
Next we’re going to go to Guy Stebbings of BNP Paribas. If you’d like to go ahead and ask your question. Guy.
Guy Stebbings (Analyst at BNP Paribas)
Hi. Morning. Thanks for taking questions. One brief follow-up on margin again, and then I was going to turn to costs. So specifically on the lending margin, in terms of the EIR here—that shouldn’t reverse but shouldn’t repeat, I think is the way I think about it. As we then look into next year, the mortgage spread headwind should ease. I appreciate this mix point working through, but even so, shouldn’t we be thinking quite a step down versus certainly Q3 in terms of that lending margin compression on a quarterly sequential basis?
Is that a fair assumption? And then on costs—really low this quarter. I appreciate the guidance doesn’t change. There’s quite a big step up in Q4. How should we be thinking about that? Is that timing that you always anticipated, or does that mean that you’re bringing forward investment that otherwise would have landed in ’27 and partially into late ’26? Thanks.
Katie Murray (Chief Financial Officer)
Perfect. Great. So in terms of the lending NIM, you’re absolutely right. So the EIR: 2 basis points of the 6 bps, and, you know, we talk about them from time to time. It’s not something I would see as a repeating sort of event. And then in terms of how that evolves, I really don’t guide on margin, but you’re trying to squeeze the lemon here, Guy. But I think it’s not really how I would say—there wouldn’t be a particular change in that, particularly once mortgage repricing ends in Q4.
It’s really a function of mix. We’ve got stronger CMM growth, which is helpful, but, you know, mortgages are always going to be a little bit dilutive given the margins we have there. But overall, we’re pretty comfortable in lending as we move forward from here. Costs. You know, we’ve talked about this a lot over time. Our guidance is £8.5 billion. There’s a natural step up that happens in Q4—bank levies at this time of year—and, as one of you said earlier, there’s only really a few weeks to the end of the year. What we’re trying to do is to make sure that we really maximize the benefit that we get from costs, so whether we put a little bit of investment forward or restructuring costs or things like that.
But you should think of £8.5 billion for the year.
Paul Thwaite (Chief Executive Officer)
I’d just add one thing on that, Guy, which is—and you can obviously see in the year-to-date cost-income ratio—the significant progress we’re making towards our ’28 target already. So we continue to feel good about the efficiency and productivity opportunities within the business. As Katie alluded to, the quarter-on-quarters can move around, but we feel very confident on this year and increasingly confident on the ’28 numbers that we put out for cost.
Thanks, Guy.
Guy Stebbings (Analyst at BNP Paribas)
Thank you.
OPERATOR
Next we’re going to go to Ed Firth of KBW. Ed, if you’d like to unmute and ask your question.
Ed Firth (Analyst at KBW)
Hi there. Thanks very much. Can you hear me again?
Paul Thwaite (Chief Executive Officer)
We got you.
Ed Firth (Analyst at KBW)
Great. I have two questions, really. I guess the first one is really just about the outlook for profitability, because if we’re looking at flat margins next year, you’ve got a higher capital requirement coming through in terms of risk-weighted assets, we’ve probably got normalization of impairments. So it feels to me like we’re sort of flat, maybe down a little bit—the risk would be to the downside in terms of profitability—and so I guess, sort of related to that, my question is what is the story in that now?
Because, you know, we’ve sort of lived off this wonderful improvement in profitability over the last three or four years but as we look forward from here, I get the growth picture, but the UK is a low-growth economy—talking about a 3% number maybe—but it’s quite difficult to get people excited about, you know, you might do it for one or two years but structurally it’s not a growth economy. So I’m just trying to think—we’re just, like I said, 20% less, a bit stuck, and you may sometimes do a bit better, sometimes a bit worse—or what is the next?
What’s going to get people excited now that the hedge is broadly there? Because margins, you know, the customers get a benefit from any upside now—broadly, that seems to be the message. And then I guess my second question is related to that, in terms of capital. I know everybody’s getting terribly excited, or trying to get excited, that maybe the Bank of England are going to release some capital, but the capital is not a constraint—you’re returning capital, doing share buybacks over years—so I don’t really understand how we get excited by that. I mean, surely if there is a capital reduction it’s going to go to customers, same as the hedge is going to customers now.
So I mean, and I’m not complaining, 20% is a great return, don’t get me wrong—I’m just trying to think what is the story where we’re going to see outperformance going forward. Thanks so much. Sorry, it’s rather a long question.
Paul Thwaite (Chief Executive Officer)
No problem, Ed. Katie, why don’t I start off as well? First of all, Ed, I’m glad you’ve recognized the last three years and the improvements and the progress. That’s good to see. See, I think that the story in my mind is very simple. I think when you think about ourselves as NatWest Group, the way I think about it is we can clearly be a structural winner in the current environment that exists. Why is that the case? One is we’ve got a clear growth track record and we’ve got the potential to increase market share in all of our businesses. So I hear your point about the UK economy, but I also believe we’ve got the opportunity to take share within the UK economy. So number one is we’ve got this growth track record and we have the opportunity. You think about the opportunities in our retail business, you think about the opportunities within our private banking and wealth management business which whilst it’s growing at a fast rate in relative terms, it’s still quite small vis-à-vis the size of the market.
So that’s number one. Number two is, again, we’ve got a great track record around cost management and driving superior operating leverage. We are the most efficient large UK bank and that leverage continues through the simplification program. We have a virtual flywheel that we can fund investment and we can support growth. So growth, cost management. We’ve also got, if you look at the Bank of England stress tests, we’re incredibly resilient under stress.
So that gives us a lot of defense and a lot of protection. You combine those three things and what you’ve got is superior returns. We’re geared towards some of the structural growth opportunities in the UK and that drives a lot of capgen, as you alluded to, and therefore stronger distributions. So I think that’s how you should think about us in the context of the story. Katie, anything to add on this?
Katie Murray (Chief Financial Officer)
No, I mean, I think the real, for me the real point is that strength of the capital generation and that’s why we do feel excited about capital. If we look at what we’ve done this year so far, 288 basis points of capital generated from profit. We’ve then invested 30 bps of that into investments. And then another basis point is the kind of strength of our organic growth. Obviously as of moving on and Pillar 2A requirement, we’re now sitting with a supervisory minimum down at 11.1%.
We look to see what happens with the FCR and then we’ll take some stock there.
OPERATOR
Great. Thanks, Katie. Thank you, Ed. Thanks, Paul. Thanks, Ed. Our next question comes from Amit Goel of Mediobanca, if you’d like to ask your question.
Paul Thwaite (Chief Executive Officer)
Hey, Amit.
Amit Goel (Analyst at Mediobanca)
Hi. Hi. Thanks, guys, and thanks for taking my question. So it’s a bit more kind of follow-up and I know you don’t want to talk too much about NIM, but just a few more bits. But I mean I guess you said that the flat NIM for 27 comes from the kind of mix and funding offsetting the hedge and that you grow deposits selectively. Just want to check in terms of the kind of the new easy access products, I mean what are they paying against the back book and what pass-through are you assuming on the November rise compared to the kind of 60% in your sensitivity?
And then also just if I am looking a bit further out, I guess going into kind of 28 once more repricing has kind of ended and mix effects settle. I guess with the hedge yield still below the 4% swap rate, I mean, should we think about that NIM starting to widen again or, you know, is that maybe just a bit too far out? Thank you.
Katie Murray (Chief Financial Officer)
Thanks, Amit. Yeah, sure. I’ve got my father’s phrase going through my head, Amit, of God loves a trier. So let me see if I can help you a little bit on some of your questions. So in terms of pass-through, the sensitivity we give you on 60 is 60% pass-through. I would work with that. We’ll look at what they actually do and then we’ll take it from there. You know, a couple of things is mortgage repricing will kind of correct itself this year. So that’s done. And then we’ll get to the kind of book price of around 60 basis points which we’ve kind of talked about.
I won’t repeat everything I said on lending kind of a few moments ago as we go through from there. But you can see in terms of swap rate and how that comes through. As I look at the structural hedge, it’s something that I think has changed this year in terms of continuing growth 27, 28 and out to those later years. Earlier in the year we were worried about that, you know, you had this point where it was reaching a level that’s lower. For me that’s not really a concern because you’ve seen the structural hedge grow and so you get the benefit in terms of the growth coming through on that.
So as I see it, is the hedge being something that will continue to add income at growing levels over the next couple of years. It will moderate a little bit in the outer years anywhere we are, but we’ve talked about adding over a billion in 2027 as we go through. So kind of overall I think, while I’d love to give you something more on NIM, I think we don’t manage to and probably stable is as precise as I’m going to be. It really will be the output of the growth and we deploy our capital, as Paul says, where we see attractive returns and you can see that in our numbers.
Lovely. Thanks very much, Amit.
OPERATOR
Thank you, Katie. Thanks, Amit. Next we’re going to Pearly Mong of Bank of America. Pearly, if you’d like to ask your question.
Paul Thwaite (Chief Executive Officer)
Hey, Pearly.
Pearly Mong (Analyst at Bank of America)
Hello. Hello, Katie. Hello, Paul. So sorry to be circling back to this, but you can imagine with the reaction being what it is. Just to help us clarify, so simplistically, if we take AIEA in Q3, let’s say we have 1 or 2% growth in Q4 and then I don’t know, maybe 7, 8% growth in line with loan growth in 27, which is sort of what you’ve, I think, guided to. To me it doesn’t sound like consensus NII needs to change too much. So effectively the AIEA, I suppose change in guidance or rather clarity on that is offsetting some of the, that may be lowering of the margin.
Is that the right way to think about it? Number one. And then I suppose if I step back, then 27 on 26 is probably about 8% growth, something like that on NII. So that’s basically in line with loan growth, which makes sense. That does mean that basically all the structural hedge benefit is going to the customers. And is that a reasonable way to think about it? And if deposit competition were to step up more in maybe Q4, Q1, how would that feed into that thinking?
Katie Murray (Chief Financial Officer)
Okay, thanks. Thanks, Pearly. There’s a lot in there. But look, I guess, Pearly, I’m not going to be any more precise. I think you’ve got the message on average interest-earning assets, that’s the right one to take. I think the key message today is that growth is going to be driving income. We’re really confident about our ability to grow attractive returns. The structural hedge is embedded within that. We see it continuing to be a positive as we move forward from here. And I guess we look forward to talking more about 27 when we meet again in February.
Lovely. Thanks very much, Pearly.
OPERATOR
Thanks, Pearly. Thanks, Katie. Our next question comes from Rob Noble of Deutsche Bank. Rob, if you’d like to unmute and ask your question.
Rob Noble (Analyst at Deutsche Bank)
Hey, good morning. I’m a little bit confused on your average interest-earning asset guide as being close to lending growth. So I thought that last five, six years that the cash was falling because we’ve had massive TFSME repayments, quantitative tightening and lending growth started growing faster than deposits. Those all look to continue next year. So why do liquid assets start to grow at the same rate as the loan book, why wouldn’t you let it all run down?
And it kind of suggests that you are a little bit bound by liquidity on your growth going forward as well.
Katie Murray (Chief Financial Officer)
So, Rob, if I can probably try to give you a kind of a simple answer. I mean, we’ve used the surplus deposits and what you’ll see happening is that we’ll start to issue more wholesale funding to support loan growth. So both sides of the balance sheet are growing and I think we’ve got a lot of capacity to do that. So I’m very comfortable in terms of where we are on that capacity to be able to continue to facilitate our strong loan growth at the right returns.
Rob Noble (Analyst at Deutsche Bank)
Sorry. So you have to, this is kind of the point, right? So you are having to hold the cash or the liquidity buffer at the same level. So you have to issue more. You can’t just run that down now. You’re having to issue wholesale funding to supply growth effectively. That’s the way to think of it.
Katie Murray (Chief Financial Officer)
Well, I think I probably react a little bit with what you’re having to issue. As we look about it and we look about where we are, we’ve got opportunities, big opportunities. We see that we’ve got a number of different mechanisms that we can take to make sure that we fund that growth. We’ve got very little wholesale funding. We’ve issued about 2 billion of covered bonds this year. That’s a very low number across the market. So we’ve got this good capacity.
What we need to make sure is to issue that wholesale that is reflected in the right returns that we get on the lending that we do. And overall we’ll see interest-earning assets grow as you see that growth coming through.
OPERATOR
Thanks, Rob. Thanks, Katie. Our next question is going to come from Andrew Coombs of Citi. Andrew, if you’d like to unmute and ask your question.
Paul Thwaite (Chief Executive Officer)
Hey, Andrew,
Andrew Coombs (Analyst at Citi)
Thanks for taking the questions. I am going to come back to the stable NIM, I’m afraid, just given the magnitude of the share price move. You’ve flagged, obviously, the moving parts in there, some more cost of funding issuance. You’ve talked about the hedge, but a lot of the things speak due to mix effects. So can I just ask a question on asset mix and then a separate question on deposit mix and what you’re assuming in the stable guide. So on the asset mix, you’re obviously growing in CIB, particularly in the CNI segment. If I actually look at the gross yields, then they’re actually ticking up nicely. If I look at the CNI NIM it’s ticked up, and I appreciate that captures some deposit expansion offset, but where in the numbers can we pinpoint what the impact is on mix effect from growing that larger CNI segment which understandably will be lower margin. I’m going to tag one on this which is that you’ve got it also being lower risk.
So does that mean that through-the-cycle cost of risk guidance comes down as an offset? And then the second question on deposit growth: again you’ve seen 1 billion NIB growth, 5 billion interest-bearing growth, it’s all in term. Is that the trend you expect to continue? Is all your deposit growth expected to come through predominantly in term going forward or is this quarter distorted by behavioural changes given the BoE raise? Thank you.
Katie Murray (Chief Financial Officer)
Thanks, Andrew. Let me try to be helpful for you in a slightly different way of looking at the rates that we’ve got. So, as you’ve heard today, we continue to have good top-line momentum. So our NII growth of 1.8% in the quarter, NIM broadly stable, up 1 basis point at 2.5%. One of my favorite slides, without being too nerdy, is slide 30, and I think it can really help you. So if you look there, your average yield increased 11 basis points in the quarter, while the average cost was up 10 basis points. That’s a reflection of the higher interest rates. If I then dig in a little bit and you’ve got there the results across the business, sort of like retail banking, the average deposits is just 3 basis points up in the quarter while lending rates are up 4 basis points.
So kind of a net positive for us, you know, driving customer rates that reflect the higher swap rates which feeds into our fixed mortgage and our deposit pricing as well as the structural hedge. So I guess while we see competition in deposit markets and things like that, we’re really thoughtful about where we’re competing, and I think if you look here it will give you a little bit more guidance in terms of that stable NIM number as we go through. So overall we are comfortable, and I keep reiterating, which I keep saying, you know, is around it really is the strength of the growth of volume that we’ll see which will help ensure that we have ongoing growth in that income line, which we are comfortable about.
Paul, can I hand back to you to chat about deposit growth?
Paul Thwaite (Chief Executive Officer)
Hey Andrew. So on deposit growth, for the quarter, as you alluded to, it’s about 6 billion of growth. That’s actually split 50/50 between retail and C&I. Andrew, as you said, there’s some growth there in non-interest-bearing balances, and then the rest is kind of savings and/or term. It’s worth bearing in mind for the term that’s across our three businesses. So that isn’t just retail; that covers C&I, private banking and wealth, and retail. So that can include, for example, in C&I, term money for one month, three months, six months, etc. So I wouldn’t default to kind of retail one-year or two-year money.
Obviously, where the growth in the retail savings business is coming is in the ISA market. That’s grown at 2x the normal savings rate, and now about 25% of retail savings deposits are in ISAs. You haven’t really seen much of that material change in mix. You can see that NIBs are stable at 30. Corporate, drill down into corporate, very much change in mix. We’ve not seen any exchange. I guess with the outlook, which is another part of your question, it really depends upon some of the competitors in the retail space but also the swap rates as well. I always take the time to remind people that higher swap rates also come through in higher structural hedge margins as well. So there’s a natural offset to that. So net-net, we’re growing our deposits. It’s across a number of our businesses. Some of it’s term, some of it is non-interest-bearing.
It is competitive, but, as Katie alluded to, we’ve got a lot of levers we can pull on the funding side. So we’re going to be thoughtful where we compete from a price perspective versus where we access different sources of funding. Hopefully that gives you a sense of how we think about it. Thanks, Andrew.
OPERATOR
Thank you for your questions today. I’m now going to close.
Paul Thwaite (Chief Executive Officer)
Okay, thanks Andrew. Thanks Ollie. We appreciate the questions. Hopefully what you’ve seen today is our momentum around growth continued in the third quarter. You’ve got all three businesses growing, you’ve got an improvement in the cost-income ratio. We’re obviously managing our risk and capital very well. So we’re delivering high levels of capital generation and high levels of returns, and we’re very confident we can continue that on a sustainable basis.
So, wish you all a good weekend when it comes. Thank you.
OPERATOR
Thank you. That concludes today’s presentation. Thank you for your participation. You may now disconnect.
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