Analysts have slapped a ‘Buy’ rating on Natwest shares after the bank’s annual results beat expectations.
Peel Hunt analysts Robert Sage and Stuart Duncan said the lender’s strong performance in 2024 increased “conviction that market expectations can be delivered”.
Natwest reported a £6.2bn pre-tax profit for 2024, up 0.3 per cent on 2023’s headline figure, and marginally ahead of analyst consensus.
However, shares in the FTSE 100 lender fell two per cent on Friday morning as investors digested the results.
Shares in fellow lender Barclays also slumped, at one point as much as five per cent on Thursday after the company posted its annual results.
Natwest shares fell despite the company’s positive dividend outlook. Sage and Duncan noted: “The CET1 ratio ended 2024 at 13.6 per cent, in the middle of its 13 per cent to 14 per cent target range, so the group is well-positioned to conduct a further directed buyback if the opportunity presents itself (the government stake is now below seven per cent).
The 21.5p dividend per share was significantly higher than expected, but at 39 per cent it was in line with the payout ratio target, and the increase in the payout ratio guidance for 2025 to c.50 per cent suggests dividend per share for 2025 of c.27p, which equates to an attractive yield of more than six per cent.”
Head of Markets at interactive investor, Richard Hunter said: “There is an element of a different day, but the same story after Barclays’ shares fell despite a perfectly respectable set of numbers yesterday.
“There is little within Natwest’s results to set any alarm bells ringing, but by the same token there is also little to add to the excitement of the last few quarters.”
Hunter added: “The market consensus of Natwest comes in at a strong buy and today’s minor reset may even provide a tempting buying opportunity for some investors.”
Natwest shares to consolidate
The lender’s shares rallied over the last year, making it one of the FTSE 100’s best performers. Over the past 12 months, the stock has nearly doubled in value, and since the beginning of 2025, Natwest’s stock has returned by nine per cent, following a period of strong investor attraction.
After this performance, Sage and Duncan noted: “The [bank’s] valuation is at the top end for the sector, and a pause in the upgrade cycle may lead to the share consolidating at current levels in spite of the positive dividend update in our view.”
Will Howlett, financial analyst at Quilter Cheviot, said: “The bank’s shares now trade at a premium compared to rivals like Barclays and Standard Chartered, reflecting the market’s confidence in its outlook.
“However, with interest rates expected to ease, the key challenge will be maintaining strong profits as net interest income starts to normalise which is its biggest source of earnings.”