UK bank shares: new price targets for NatWest and Lloyds

Following a largely bullish bank sector reporting season, City analysts have run the numbers and come up with fresh forecasts. Graeme Evans reveals them here.

4th August 2026 14:03

by Graeme Evans from interactive investor

Share on

A cyclist rides a bike past the London headquarters of NatWest bank. Photo: HENRY NICHOLLS/AFP via Getty Images.

The buy case for Lloyds Banking Group (LSE:LLOY) and NatWest Group (LSE:NWG) continues to be made after recent results from the UK lenders helped their re-rated shares trade at fresh post-financial crisis highs.

City firm Berenberg sees further upside of 25% on NatWest after lifting its price target to 880p, while UBS yesterday backed Lloyds to advance to 133p from the current level of 117p.

Invest with ii: Top UK Shares | Share Tips & Ideas | Open a Trading Account

The upgrades follow another strong earnings season after NatWest beat the City’s second-quarter profit hopes by 10% and said it would consider a move to restart share buybacks six months earlier than planned.

Lloyds produced a smaller beat versus consensus before unveiling its strategic vision for the next four years. That included a punchy target for a 2030 return on tangible equity of about 20% that compared with its current 2026 guidance in excess of 16%.

NatWest shares this morning traded at a multi-year high of 726p, having been at 182p in October 2023, while Lloyds peaked at 117.9p after a run from 40p three years ago.

The re-rating for Lloyds and other lenders has been aided by their margin-enhancing use of structural hedges to smooth out interest rate volatility, as well as robust lending volumes and benign underlying trends for impairments.

Strategic initiatives on costs and targeted expansion in non-interest areas such as wealth management have also driven the strong recent performance.

The post-results upside provided the opportunity for some ii customers to lock in profits after the pair featured among the most traded on our platform during Monday's dealings. However, about four out of every 10 trades were still to buy or top-up stakes.

Reiterating its Buy stance, UBS noted this week that Lloyds’ targets were consistent with 2026-30 compound growth in pre-tax profit and earnings per share growth of 8% and 12% respectively.

It also highlighted “attractive” total distributed yields of 10% each in 2027 and 2028.

This compares with the sector at 7-8% and includes growth in UBS’ projected dividend to 5.5p and 6.3p for those two years from 2025’s 3.7p. This would represent yields of 4.7% and 5.4% at current prices.

While the 2030 return on tangible equity target is below the pre-results consensus of 21.3%, UBS said investors appear to be taking the view that there’s sufficient upside potential to guidance and business momentum to deliver the previous forecasts.

The bank added: “We think that stance is reasonable. Lloyds is delivering, showing good evidence of returns on past investment in improvements to the breadth, quality and profitability of its products and appears to us to have credible plans to continue on that path.”

It noted that Lloyds and some other lenders were starting to talk about margins that eventually fall, loan losses which normalise and capital intensity which rises - all arguably late cycle thoughts.

“We think the bank’s free cash flow is undervalued and that the UK re-leveraging process is mid/early cycle and we want to retain exposure to those investment trends.”

Deutsche Bank, which has a price target of 125p, added that high revenue growth, substantial capital generation and high returns were all very attractive targets for Lloyds at a current valuation of 9.5x forecast 2027 earnings.

On NatWest, Berenberg points out that its new 880p price target or 8.5 times forecast 2028 earnings is in line with the bank’s long-run average two-year forward valuation multiple.

It added: “We believe that the broad-based growth demonstrated with the second-quarter results can continue, supporting outer-year revenues and earnings.”

With operating performance better than management expected and coupled with good line of sight about capital generation in the second half, NatWest has said that it will consider the resumption of buybacks six months earlier than previously planned.

Berenberg believes that a buyback of £500 million is likely with full-year results, bringing the 2026 total payout ratio to 62% of earnings compared with last year’s 48%.

The bank’s upbeat position contrasts with the more cautious stance of Shore Capital, which has a Sell recommendation for Lloyds and Hold position on NatWest.

On the former, Shore questions whether returns approaching 20% are sustainable through the cycle given the risks from competition, additional bank taxation and the inherent cyclicality of both the UK economy and Lloyds’ earnings.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Get more news and expert articles direct to your inbox