NatWest Group PLC (LSE:NWG), Lloyds and other UK banks have received a bullish update from Goldman Sachs, pushing share prices across the sector higher.
The US investment bank reiterated a ‘buy’ rating on NatWest ahead of fourth-quarter results due on 17 February, where it expects the high street lender to show an increase in net interest income (NII) to £3bn, up from £2.6bn in the third quarter.
This would take the annualised rate to £12bn, or £4.4bn more than the £7.6bn achieved in 2021.
“The sharp step-up is driven by policy rates with the step-up being more back-end loaded into the second half and particularly teh fourth quarter,” Goldman noted.
“We see the NII uplift driving a step change in profitability, lifting return on total equity by 11 percentage points towards around 18-20% by 23/24 which we find has not been reflected in valuation” the bank added.
Goldman also lifted its price target for NatWest to 490p from 460p with the company on the broker's conviction buy list.
The bank also likes Lloyds Banking Group PLC (LSE:LLOY), where it reiterated a buy rating with an increased price target of 76p (from 73p) and Barclays where the rating is also a buy with a price target of 280p, up from 255p.
Lloyds results are due on 22 February, following Barclays on 15 February, Standard Chartered on 16 February and HSBC on 21 February.
Shares in Natwest rose 0.7% to 300.7p, while Lloyds was up 2% to 51.06p.