NatWest Group PLC (LSE:NWG) is still a buy for analysts despite guidance for 2024 disappointing experts and the City warning that consensus estimates would be cut.
Shore Capital keeps its ‘buy’ rating for NatWest, but cut its share price target by 40p to 290p, albeit representing around a 30% upside to the current 225p price.
The British bank traded close to 6% higher on Friday after its 20% increase in pre-tax profits to £6.2 billion was better than the market had predicted, with surprise shareholder returns also being welcomed.
However, Shore Capital notes that guidance for a 14-16% return on tangible equity (ROTE) over the medium term has now been replaced by predictions of a 12% rise in 2024 and more than a 13% jump by 2026.
While analysts at the UK broker believe this downgrade is “likely to disappoint the market” they noted that consensus had already been reduced to 12.4% in 2024 and to 13.2% by 2026.
City forecasts have 2024 pre-tax profits set at £4.68 billion, with Shore Capital expecting a slightly higher £5.03 billion.
Earnings per share are therefore expected to reach 36.7p, according to consensus, or 40.1p on Shore Capital’s analysis.
Yet, following Friday’s update, the boutique broker is convinced consensus figures will drop by around 6-8%, leaving pre-tax profits at between £4.3 billion to £4.4 billion.
In a separate issue, NatWest confirmed the appointment of a permanent chief executive officer in Paul Thwaite, an insider who has worked at the bank since 1997.
Shore Capital welcomed the decision, claiming it would provide continuity and remove “a key uncertainty” surrounding the stock.