Hot off the heels of the government paring down its NatWest Group PLC (LSE:NWG) stake even further, UBS analysts have reiterated their bullish outlook on the bank with a buy rating and an elevated price target of 265p from a previous 250p.
While revenues and earnings are expected to go down in full-year 2024, this follows hard-to-beat net interest margin (NIM) comparables in the past year.
Specifically, top-line revenues are likely to fall around 7.4% to £13.27 billion with pre-tax profit declining by a quarter to £4.73 billion.
These targets still put NatWest in a favourable light, particularly given its cheap valuation, says the bank.
UBS noted the bank is trading at 6.1 times its projected 2024 earnings per share and at 0.8 times its tangible net asset value, for an anticipated return on tangible equity of 12%.
This valuation is particularly attractive, reckons the bank, while a projected 40% dividend payout at a 7.6% yield at current market prices will attract investors.
NatWest is aiming to keep a healthy CET1 ratio – a regulatory measure of liquidity – of 13-14%.
This makes for “achievable targets (at a) discount valuation”, said UBS.