Shore Capital rates NatWest a 'buy', but upside limited
[Shawn - stock.adobe.com]
Shore Capital has reiterated its 'buy' rating on UK banking group
NatWest reported a pre-tax profit of £1.33bn for the first three months of the year, down 27% year-on-year but £68m ahead of consensus forecasts, representing a beat of 5%. This was due to positive changes in net interest income, impairments, and litigation and conduct charges.
Reported earnings per share of 10.5p beat consensus by 9%, tangible net asset value per share of 302p beat consensus by 9p, while reported return on tangible equity of 14.2% beat consensus by 1.3 percentage points.
However, the fact that NatWest's board has chosen to keep full-year guidance unchanged "may disappoint investors following a recent strong run in the shares", said Shore Capital analyst Gary Greenwood.
He pointed out that the stock has surged 32% so far this year - as of Thursday's closing price of 290p - outperforming the FTSE All-Share Index by 28%
Shore Capital's fair-value estimate for the shares is 315p, which implies just 9% upside from Thursday's price - though Friday morning's 3.4% gain to 299.7p reduces that somewhat.
"NatWest currently offers the least upside to fair value of the large UK banks. We retain a 'buy' recommendation for now, but we will review the appropriateness of this in light of any share price reaction and further commentary on the results call," Greenwood said.
Disclaimer & Declaration of Interest
The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.