Berenberg lowers target price on NatWest

Berenberg said NatWest's updated revenue and cost guidance was "disappointing", in its view, and had led to a 7% fall in the bank's share price on the day of its recent results, despite stronger Q4 earnings and capital returns.

However, while the German bank's earnings per share expectations fell by up to 4% to reflect the bank's updated guidance, it still believes that NatWest can generate a 15.3% full-year 2023 return on tangible equity - rising to more than 16% from FY 2024.

"Moreover, we regard this as a floor," said Berenberg, which reiterated its 'buy' rating on the stock. "Specifically, applying more realistic assumptions to NatWest's guidance, alongside a 25 basis point loan loss rate, would increase our forecast RoTE by circa 1.1 percentage point."

"Trading on 1.0x total book value, we believe that NatWest's attractive returns remain undervalued."

Reporting by Iain Gilbert at Sharecast.com