Shore Capital says NatWest Group PLC (LSE:NWG) second quarter results have once again outpaced market forecasts, prompting the bank’s management to raise its full-year targets.
Return on tangible equity (RoTE) for the period came in at 17.7%, comfortably ahead of expectations, and NatWest now expects to deliver at least 16.5% for the year as a whole. Income guidance has also been lifted to more than £16 billion.
The broker highlights that these upgrades were underpinned by stronger non-interest income, tight cost control, and an improved outlook for loan impairments.
Earnings per share of 15.3p were 11% higher than consensus, and shareholders are being rewarded with a 9.5p interim dividend and a new £750 million share buyback.
Looking ahead, Shore notes that NatWest’s capital position remains robust, supporting the potential for further dividend increases and buybacks.
However, it is a little more cautious on the long-term outlook, nudging their fair value target to 500p from 495p.
It argues that sustaining returns at this high level will be tough, given tightening mortgage spreads and the risk of extra taxes on banks.
Even so, the broker thinks strong capital generation should continue for now, keeping returns to shareholders attractive.
The shares are trading above Shore’s fair value, but with a resilient loan book, tight cost control, and improving guidance, NatWest remains firmly in the spotlight.
The shares were down 0.7% at 515.6p.