Referring to NatWest Group PLC (LSE:NWG)'s simplification plans under new CEO Paul Thwaite, investment bank Keefe Bruyette & Woods (KBW) concluded that "executing this dream may prove more difficult than the spreadsheet suggests".
During a presentation to KBW's sales force, NatWest emphasised its transition from extensive restructuring to focusing on routine business operations.
Under Thwaite, the bank aims to have a more straightforward structure coupled with dynamic capital management.
KBW is confident that revenue pressures will ease in the second half of 2024 and into 2025 as the impacts of mortgage re-pricing and changes in deposit mixes start to subside.
NatWest reported a return on tangible equity (ROTE) of 14% in the first quarter, surpassing the full-year target of around 12%. The bank is expected to update its economic assumptions, including potential interest rate cuts in 2024, at mid-year.
KBW stated: "We like UK banks that have weathered higher interest rates without significant credit issues.
"While we believe achieving these goals may be challenging, the positive trajectory should continue in the near term."
Despite preferring Barclays and Lloyds, KBW noted that NatWest's shares are not overly expensive with a price-to-earnings (P/E) ratio of 7.2 times and a price-to-tangible-book-value (P/TBV) ratio of 1.0 times.
KBW reiterated its "market perform" rating with a target price of 300 pence.
In afternoon trading the stock was up 1.2% at 315.6p.