Proactive Investors - NatWest Group PLC (LON:NWG) has rallied over the year so far despite the government selling off its stake in the bank, likely leaving shares in fair value territory, Shore Capital analysts believe.
A ‘buy’ rating was downgraded to a ‘hold’ by Shore Cap as a result, following the 45% increase in NatWest stock since January.
Though lowered expectations for base interest rate cuts this year could support margins, Shore Cap said increased revenue expectations had already been priced in.
Sales of the government’s remaining 27% stake in the bank also loom, analysts noted, with these likely to step up in the months ahead before a full exit next year.
Shore Cap said a further 5% of NatWest would likely be bought back from the government in a directed buyback over the coming weeks.
Alongside an anticipated discounted retail offering of around 10%, this could take the government’s stake in the bank to as low as 10-15% by the year end, Shore Cap forecast.
“While near-term risk to guidance and forecasts may still lie to the upside, we feel the risk [to] reward to the shares is more finely balanced,” the broker said.
“The upside to our 350p fair value is now just 9%. Consequently, we downgrade our recommendation.”
Shore Cap added NatWest’s rally had come after share price weakness last year, fuelled by concern over changing consumer habits on higher interest and the Nigel Farage de-banking scandal, which saw the departure of former chief executive Alison Rose.