NatWest Group reported a 30% increase in fourth-quarter pre-tax profit, surpassing market forecasts. The UK-based bank has outlined a strategy to reduce costs and enhance earnings through technological investments over the next three years. Pre-tax profit for the quarter reached £1.94 billion, exceeding analysts' expectations of £1.7 billion. Full-year earnings climbed to £7.7 billion, the highest level since the financial crisis and also above estimates. The net interest margin, a key measure of banking profitability, rose to 2.45% from 2.37% in the previous quarter. The bank continues to employ a structural hedging strategy to mitigate risks associated with gradually declining interest rates. Analysts described NatWest's performance as strong with a solid outlook. The bank announced an agreement to acquire wealth management firm Evelyn Partners for £2.7 billion, aiming to expand its coverage of high-net-worth clients in its domestic market. A £750 million share buyback program was also announced, though the next repurchase is not expected until later next year. Management detailed the acquisition, projecting mid-to-high single-digit profit growth. Including revenue and cost synergies, pre-tax operating profit is anticipated to exceed £300 million by the third year, with a total return on invested capital expected to surpass 11%. The CEO stated that retail banking, commercial banking, and private banking divisions all performed well, describing the Evelyn Partners acquisition as a transformative addition to their wealth management business that provides the scale needed to thrive in an industry experiencing disruptive changes through AI adoption. NatWest provided guidance for the next three years, forecasting a return on tangible equity above 17% for this year, rising to 18% by 2028, and a cost-income ratio below 45%, down from 48.6% last year. The lender indicated it has invested £1.2 billion in technology, AI, and process simplification for 2025, creating an additional £100 million in investment capacity. The Edinburgh-based bank expects customer assets and liabilities to grow at a compound annual growth rate of 4% through 2028. UK bank stocks have seen sustained gains over the past two years, supported by stable albeit slow economic growth, low customer loan default rates, and a more supportive political and regulatory environment under the Labour government focusing on economic growth. The bank set aside £136 million for potential bad loans, below analyst forecasts and representing just 13 basis points of its total loan portfolio. Despite weak UK economic growth and rising unemployment, the bank reported that nearly all borrowers are repaying their debts on time. Earlier this week, Barclays announced plans to return at least £15 billion to shareholders by 2028 as part of its long-term strategy to cut costs, improve profitability, and focus more on domestic operations. The previous week, Lloyds Banking Group announced an additional £1.75 billion share buyback after its core banking business and emerging insurance and wealth management products boosted fourth-quarter earnings. Since receiving a government bailout during the 2008 financial crisis, NatWest has transformed into a primarily domestically-focused lender. Last year, the UK government sold its remaining stake in the bank. Analysts noted that the results highlight NatWest's successful shift to a simpler, more profitable domestic lender after abandoning its global expansion ambitions from the RBS era. Commenting on the earnings, Bank of America analysts described NatWest's fourth-quarter performance as solid, noting that the combination of growth commitments and cost control should translate into positive operating leverage and sustainable returns above 10% annually. They raised their price target from 735 pence to 770 pence.