Peel Hunt analysts have downgraded their rating on Natwest stock to ‘Add’ after previously telling investors to ‘Buy’.
An ‘Add’ rating serves as a diluted version of the ‘Buy’ recommendation, which strongly recommends investors to purchase the stock.
The analysts raised the Natwest’s target price to 510p, up from 470p, but said due to the stock’s recent performance, further upside was limited.
Shares in the FTSE 100 giant have climbed over 80 per cent in the past year.
Despite the downgrade, analysts Robert Sage, Stephen Payne and Stuart Duncan said the bank’s “prospects remain attractive.”
“We envisage a central case scenario in which a de-risked business delivers moderate growth at high levels of profitability, in conjunction with attractive capital returns.”
The bank posted a £6.2bn pre-tax profit in 2024, ahead of £6.1bn pencilled in by analysts and up 0.3 per cent on 2023.
The analysts did not adjust their earnings projections significantly but noted Natwest had “provided generally conservative guidance in recent years, contributing to the earnings upgrade cycle (which has now come to a temporary halt).”
Government stake to be ‘zero by end of summer’
Estimated earnings per share were raised by four per cent for 2025, with the analysts citing lower impairment expectations; however, they left 2026 guidance unchanged.
Natwest increased its dividend payout target from around 40 per cent to near 50 per cent of attributable earnings, leading to the analysts raising dividend expectations.
In its annual results report the lender announced it had reduced the Government’s stake in the group to 6.98 per cent following a disposal of nearly 80m shares.
The move followed the Government’s ongoing plan to gradually dilute its ownership in Natwest, which first began after the 2008 Financial Crisis.
Sage, Payne and Duncan said: “We estimate that at the current rate of on-market share repurchases, it will have reduced to zero by the end of the summer.”
“The exit of the Treasury from the shareholder register is a positive development, in our view, removing an overhand and creating a much cleaner investment narrative as it returns Natwest Group to a demonstrably fully independent state,” they added.
