NatWest remains on Goldman Sachs (NYSE:GS) conviction list of buys as the US banks said fears of a price war in mortgages due to ring-fencing have yet to materialise.
“Previously, we argued ring-fencing would drive industry profitability lower as banks would attempt to deploy sizeable excess deposits into mortgages, with mortgage pricing falling over the 2016-19 period.
“Evidence from 2Q22 earnings shows UK deposit betas remain low despite higher policy rates given a large quantum of excess deposits that are trapped within the UK ring-fences.”
Goldman Sachs (NYSE:GS) cites this as the main reason behind the strong second quarter beats of net interest income (NII) and higher returns guidance in our view.
“Natwest is the key beneficiary of higher UK policy rates and we reiterate our buy rating.”
Shares fell 1% to 243.6p.