JPMorgan upgrades NatWest, adds to 'top picks' list

JPM said it remains bottom-up in its approach to European banks, and further shifts the portfolio away from short-rates driven net interest income (NII) geared banks as it believes we are at, or near, peak rates in key geographies.

The bank’s house view is for no further hikes by the European Central Bank, Bank of England or Federal Reserve, but rate cuts starting with the Fed and ECB in H2 2024.

"Hence, we shift away from currently low deposit beta driven NII-geared banks and instead increase the quality bias of our portfolio by adding BBVA to current top picks UBS, ING and ISP," it said.

JPM also added NatWest to its 'top picks' portfolio, as it sees the stock materially undervalued at 4.8x price-to-earnings 2025E.

"While 4Q net interest margin could still be under pressure, we see this as largely discounted and in 2024/25 we are in line with consensus on NII," it said.

At 0950 GMT, NatWest shares were up 0.7% at 207.90p.