The case for & against
Bull & Bear analysis
NatWest Group plc (LON: NWG) is a leading retail and commercial banking institution based in the UK, offering a comprehensive range of banking services across personal, business, and commercial sectors. The bank actively focuses on disciplined growth, leveraging technology, and employing effective balance sheet management to optimize performance amidst fluctuations in the macroeconomic environment. With a recent acquisition of Evelyn Partners enhancing its wealth management capabilities, NatWest positions itself favorably within the ongoing shift towards digital and sustainable finance.
Bull says
- ↑Customer lending rose 6.6% YoY to £400 bn; deposits up 2.6% to £445 bn
- ↑Dividend yield 4.9% and £1.5 bn in buybacks underscore strong cash returns
- ↑Acquisition of Evelyn Partners expected to lift wealth RoTE above 18%
- ↑AI investments driving cost-income ratio improvements through efficiency gains
- ↑Loan impairment low at 16 bps, CET1 ratio solid at 14.3%
- ↑EPS up 15.5% YoY to 17.9p; revenue grew 15.8% to £4 bn
Bear says
- ↓Mortgage spreads below 70 bps squeeze net interest margins
- ↓GDP growth forecast at 0.4% may slow lending expansion
- ↓Evelyn Partners integration risk could delay expected synergies
- ↓Basel 3.1 capital rules may raise requirements and squeeze returns
- ↓Elevated short interest reflects investor pessimism on performance
- ↓Negative analyst revisions and rising costs could dent profitability
Investment themes with NWG
Value-oriented stocks outside domestic markets
Stable developed market with finance and pharmaceuticals
Banks operating across multiple countries
Highly rated stocks according to Seeking Alpha
Earnings Call · Q1 2025 · Mgmt. Guidance
Transcript signals
Bull points
- Bringing a million customer accounts to NatWest with the closure of Sainsbury's Bank is a strategic win, significantly improving our market share in unsecured prime credit cards to 11% based on transactions.
- Given the strength of the first quarter, we are updating our 2025 guidance. We now expect to be at the upper end of the range for both income and returns.
- We continue to believe the business is very well positioned to deliver strong shareholder returns. And to that end, we've updated our returns guidance to the upper end of the 15 to 16 percent range for 25.
Bear points
- it's driving cost and friction into, I guess, how we serve our customers. So I wouldn't just highlight that it is a cost-driven argument. Arguably, most importantly, it's a customer-driven argument. It does impact our customers. It adds to the cost and complexity of serving customers across the ring fence. That includes UK commercial and SMEs. So it can distort decisions. It can distort pricing. and arguably limit banks' ability to support the economy and the growth agenda.
- We will review other buybacks, as you'd expect, with the board and update at the half year and at the full year. That's when we tend to do that.
- We continue to assume three further base rate cuts this year, with rates reaching 3.75% by the year end. Expectations for the UK bank rate moved down in April, closer to our base case, but we recognize that uncertainty remains and the actual outcome may differ.