NatWest Group PLC (LSE:NWG) shares fell 3% despite posting full-year results that beat expectations, as analysts questioned whether the strong profitability was fully sustainable.
Peel Hunt noted that NatWest’s better-than-expected £6.2 billion pre-tax profit was driven by lower loan impairments, which came in at just 9 basis points versus market expectations of 15.
However, with the bank’s valuation at the upper end of the sector and the earnings upgrade cycle appearing to have run its course, Peel Hunt suggested the stock may “pause for breath.”
The broker maintained its £4.70 price target but said it would review its recommendation.
Shore Capital also pointed to a solid performance, highlighting stronger-than-expected income and an improved return on tangible equity (RoTE) target of 15-16% for 2025 as it repeated its 'hold' recommendation.
However, analysts noted that market forecasts had already factored in much of the guidance and expected only a “neutral to slightly positive” response.
Both brokers welcomed NatWest’s decision to raise its dividend payout ratio to 50% from 40%, which will lift consensus dividend forecasts. But with the shares up sharply over the past year, analysts saw little immediate upside, contributing to the negative market reaction.
The stock was off 12.8p at 424.2p.