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Natwest Group estimate tweaked lower by leading investment bank

Published: 11:45 20 Feb 2023 EST

NatWest Group PLC -

Barclays Capital has cut its near-term earnings estimate for Natwest Group PLC following lower pre-provision profits but has lifted outer years slightly on lower impairments.

The UK clearing bank's current-year revenue guidance of £14.8bn appears underpinned by a number of conservative assumptions, which suggest upside potential, the research note said.

However, the outlook for deposits has emerged as a key area of uncertainty following fourth quarter outflows sooner than expected, rising deposit betas and mix shift, it said.

Barclays Capital sees Natwest's potential deposit outflows as potentially more significant than peers, it said.

Excess liquidity, resulting from Covid deposit inflows, is a rich source of income for the bank but any potential unwinding of this liquidity position, perhaps as a result of deposit outflows, could prove key.

Capital returns remain a key attraction, but Natwest's ongoing strategic efforts to address 'a structural underweight' in fee income may require further inorganic growth, following the recent acquisition of Cushon, Barclays said.

The shares were trading at about one time this year's tangible assets for a 15.7% to 15.2% return on tangible equity, the note said.

Barclays repeated its 'equal weight' recommendation on the stock and 400p price target - which is a 41% premium to the current share price of 283p.

Of the 22 banks and brokers following Natwest, 17 are positive on the stock. The consensus price target is 370p.

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