NatWest Group PLC (LSE:NWG) latest results suggest the bank has found its rhythm again.
UBS lifted its price target to 665p from 590p and kept a 'buy' rating, arguing that solid momentum across lending, income and capital returns supports management’s more confident tone.
The shares, up 1.2% at 579.6p, leave around 15% upside to the new target.
Third-quarter figures beat expectations almost across the board. Pre-tax profit excluding one-offs and litigation costs came in 7% above consensus, with total income up 2% and operating expenses 2% lower.
That translated into a 5% increase in pre-provision profit, or 7% including litigation items, while loan losses were lighter than feared, with impairment charges running at just 15 basis points of loans.
The result was a return on tangible equity close to 20% and a core capital ratio of 14.2%, about 40 basis points stronger than expected.
Management responded by upgrading its 2025 guidance. The bank now expects a return on tangible equity above 18%, compared with at least 16.5% previously, and income of roughly £16.3bn, a touch higher than earlier forecasts.
Other targets, including costs of about £8.1bn and credit charges below 20 basis points, were maintained. NatWest will outline goals for 2028 at its results in February, while its 2027 target of at least 15% return on equity remains unchanged.
The operational trends were encouraging. Net interest margin, a key measure of profitability, rose nine basis points in the quarter to 2.37%, helped by a shift away from term deposits.
Lending increased 1.1% on the quarter, with commercial and mortgage books both growing modestly. Deposits slipped 0.3%, broadly in line with other UK peers.
UBS now expects earnings per share to grow 11–12% a year in 2026 and 2027, valuing the stock at 7.2 times forecast 2027 earnings, or about 1.5 times tangible book value.
The analysts see the bank delivering a sustained return on equity of 18–19%, comfortably above the sector average.
With capital strong, margins firm and costs under control, NatWest looks well placed heading into 2026.
After a long stretch of self-help, the group finally seems to be getting back to doing what banks are meant to do: making money.