Berenberg hikes target price on Natwest

Berenberg stated Natwest's results included one fault, noting the bank's guidance for a FY26 return on tangible equity greater than 13% was unchanged, despite a "significantly stronger" starting point for revenues and improved prospects for margins and growth.

"We regard a 14% RoTE as a realistic floor," said Berenberg. "These returns can be complemented by superior growth and capital returns versus key peers, in our view. Partly as a result, we believe that NatWest can comfortably justify a 25% premium to total book value per share (which can grow by circa 12% annually) versus a current valuation of c1.1x TBVps."

The German bank also believe that further market share gains will be likely for the bank, particularly in UK mortgages and commercial banking, and believes NatWest to be well positioned to benefit from improving prospects for UK lending growth.

"We expect circa 3.5% organic annual loan growth during the next three years. Announced acquisitions provide a further circa 1.2% benefit," said Berenberg, which reiterated its 'buy' rating on the stock.

Reporting by Iain Gilbert at Sharecast.com