LONDON - Barclays (LON:BARC) has revised its outlook on NatWest Group PLC (LON:NWG), upgrading the bank's status from 'equal weight' to 'overweight' and increasing its share price target from 315p to 330p. The move comes as Barclays positions NatWest as its preferred UK bank, highlighting the bank's strategic strengths, including a robust structural hedge.
NatWest recently reported a significant rise in third-quarter net interest income, which climbed to £123m. Despite this increase, the bank experienced a quarterly loss of £57m year-over-year. However, following the upgrade announcement by Barclays today, NatWest's share value saw an uptick of 1.9%, reaching 204.7p.
Further bolstering the positive outlook, Barclays analysts projected a strong profit recovery for NatWest. Backed by what Barclays describes as a best-in-class structural hedge yield and an expected return on tangible equity (RoTE) in double digits, NatWest's financial performance appears resilient. The bank's third-quarter earnings highlighted a pre-tax profit of £1.3 billion and total income of £10.9 billion over nine months. Nevertheless, the net interest margin (NIM) slightly decreased to 2.94%, attributed to more customers choosing interest-bearing accounts.
Barclays anticipates almost a 60% potential gain in NatWest's share price, which is notably higher than the 55% estimated gain for Lloyds Banking Group (LON:LLOY) PLC.
InvestingPro Insights
In light of the recent developments, let's delve into some real-time data from InvestingPro. NatWest Group PLC has a significant market capitalization of $45.73 billion. The bank's P/E ratio stands at a low 4.4, indicating a potential undervaluation. Revenue growth for the last twelve months as of Q3 2023 is a robust 18.07%, reflecting a healthy financial performance.
InvestingPro Tips shed further light on the bank's financial health. Notably, NatWest has been experiencing accelerating revenue growth and consistently increasing earnings per share. The bank also pays a significant dividend to shareholders, with a yield of 5.42% as of the end of 2023. These factors, combined with the fact that analysts predict the bank will be profitable this year, paint a promising picture for NatWest's future.
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