Barclays upgrades NatWest to 'overweight'

Barclays analysts have raised their rating for NatWest from 'equal weight' to 'overweight', saying it expects a big rebound in profits.

"We upgrade NatWest on signs of slowing deposit migration, now see the bank as best placed to overcome term-funding risks, and look for a substantial rebound in NIM and earnings, ahead of consensus, driven by a best-in-class structural hedge tailwind," Barclays said.

On 27 October, NatWest reported a third-quarter net interest income – the amount it earns in interest on loans compared to how much it pays in interest on deposits – of £123m in the three months to 30 September, up from £43m in the second quarter and £33m in the third quarter of 2022. The bank reported a quarterly loss of £57m, up from a loss of £133m the year before.

"NatWest is now our preferred pick among UK banks," Barclays said.

Barclays raised its target price from 315p to 330p for Natwest's shares, which were up 1.9% at 204.7p by 0913 GMT.