Berenberg raises target price on NatWest

Berenberg said NatWest had broken free from the trend of falling net interest margins during Q1 and noted that while a further quarterly expansion was not guaranteed, volume and margin dynamics had strengthened and the bank was now growing faster than peers.

The German bank noted that despite these developments, NatWest's conservative guidance has not changed. Berenberg reckons that guidance to current interest rate expectations may imply £500.0m of additional revenues during FY24, leading it to now expect it to generate a sustainable return on tangible equity of roughly 13%.

"These returns are poorly reflected in the bank’s valuation, trading on 0.9x TBV," said Berenberg, which reiterated its 'buy' rating on the stock.

"We see no reason for NatWest to trade below TBV, considering a c13% sustainable RoTE and c11% annual total yield. Our 350p price target for NatWest (up from 325p) values the bank at a modest premium to TBV."

Reporting by Iain Gilbert at Sharecast.com