NatWest shares tipped to extend rally past significant figure

Impressive results have triggered a number of analysts to upgrade price targets for the high street bank. Graeme Evans reveals how high they think the shares can go.

29th July 2025 15:20

by Graeme Evans from interactive investor

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NatWest Group (LSE:NWG) shares have been backed to extend their run as far as the £6 threshold after Friday’s forecast-beating second-quarter results triggered more City upgrades.

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Analysts at JP Morgan and Goldman Sachs have added 10p to their price targets, leaving them at 610p and 595p respectively after NatWest also sweetened guidance for the full year.

The strongly-performing shares today changed hands at 526.6p, having risen by 11% since 2 July and by 28% since the market-wide tariffs sell-off in early April. They were 322p last August.

UBS lifted its estimate from 553p to 590p, pointing out this week that it viewed the UK domestic banks as a core holding in a pan-European portfolio.

It said that Lloyds Banking Group (LSE:LLOY) and NatWest delivered 5-6% higher pre-provision profit than market forecasts in their results last week, with “very strong growth” underpinned by structural hedge tailwinds that are expected to persist to 2027 at least.

UBS also highlighted good volume growth, sensible industry product pricing and solid cost control based on expectations for 1-2% inflation in 2026 against 7-9% income growth.

On NatWest, the bank lifted its earnings per share forecasts by 4-13% for 2025 through to 2027. It added that credit quality remained strong, with impairments in last week’s results modest at 19 basis points of loans.

Shareholder distributions were also stronger than forecast after NatWest declared a dividend of 9.5p a share and pledged to buy back another £750 million of its shares. This compared with City predictions of 9.1p and £730 million respectively.

UBS said: “NatWest is delivering strong profit growth driven by an expanding balance sheet, a powerful structural hedge tailwind and strong cost discipline in line with the firm's established track record.”

Despite the sluggish UK economic backdrop, NatWest increased its full year income guidance to more than £16 billion from the upper end of its previous £15.2-£15.7 billion range.

This leads to an increase in Return on Tangible Equity (RoTE) guidance to more than 16.5%, from the upper end of a 15-16% range.

Shore Capital said this should not have come as a huge surprise, noting that the City consensus was already at £16 billion and 16.6% for income and RoTE respectively.

The City bank only nudged its fair value estimate of shares to 500p from 495p as it believes the group may find it difficult to sustain such high returns over the long-term.

It is worried about a combination of competitive pressure, amid recent signs of tighter mortgage spreads, and the risk that the industry may be a target for additional taxes.

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