NatWest shares jump 3% as Barclays upgrades bank, raises price target to 850p

Investing.com -- NatWest (LON: NWG) shares rose on Tuesday after Barclays upgraded the UK lender to "overweight" from "equal weight", citing potential earnings upside from higher interest rates, continued business growth and further benefits from its Evelyn wealth management acquisition.

Shares climbed 3.3% to 675.20 pence in London trading, outperforming the broader FTSE 100, which was up around 0.7%.

Barclays raised its price target to 850 pence from 740 pence, a 15% increase, arguing that NatWest is well positioned to benefit from higher UK interest rates and a steeper yield curve. The revised target implies potential upside of around 26% from Tuesday's quoted share price.

The bank expects a 50-basis-point increase in its terminal Bank Rate assumption to 4.25% to lift NatWest's earnings per share by around 5% in 2028, with the benefit potentially reaching 10% over time as its structural hedge matures.

Barclays raised its earnings-per-share estimates by up to 7% across 2026-2028, primarily reflecting stronger revenue expectations.

Barclays said intensifying deposit competition would partly offset the benefit of higher rates, but it does not expect a repeat of the sharp adverse deposit-mix shift seen in 2023.

The bank argued that households may be approaching their limit for moving savings into more expensive term deposits.

The analysts also identified potential upside from NatWest's integration of Evelyn, saying the transaction was progressing well and offered opportunities to sell banking products to wealth-management customers. This could help the lender exceed its expected revenue synergies over time.

Potential increases in UK bank taxation remain a near-term risk ahead of the Budget, but Barclays expects the impact to be manageable and believes much of the risk is already reflected in NatWest's valuation.

The bank also highlighted the lender's relatively low valuation compared with European peers, describing the shares as an attractive buying opportunity.

Original Article

You May Also Be Interested In

• AI-powered cyber threats light a fire under cybersecurity stocks
• Robert Half stock rises as analysts lift targets after Q3 results
• SBA Communications surges on tower demand optimism