NatWest: analysts see strength underneath results that disappointed market Proactive uses images sourced from Shutterstock
NatWest Group PLC (LSE:NWG) left analysts broadly split after first-quarter results that missed expectations but did little to dent confidence in the wider outlook.
Deutsche Bank described the update as a “small miss”, pointing to weaker non-interest income, particularly in markets and debt capital markets, with total income excluding notable items around 2% below consensus.
Profit before provisions was also a 2% miss, though balance sheet growth sees as remaining solid, with loans up 1.96% compared to the fourth quarter of last year.
Shore Capital said results from the end of last week “slightly disappointed the market”, with the upgrade to income guidance “more modest than investors had perhaps hoped”.
Even so, the analysts noted “underlying business performance remains solid”, supported by cost discipline and capital generation.
Shore Cap said it prefers NatWest to Lloyds on valuation grounds, but favours Barclays over both, given a lower valuation.
UBS took an even more constructive view, with analysts arguing that “weak sentiment provides an opportunity”.
Analyst Jason Napier highlighted that while profits were around 4% below expectations, this had not altered the broader investment case, with earnings forecasts nudged higher and loan growth described as “broad-based and attractive”.
All three analysts pointed to resilience in core metrics, with asset quality remaining stable, while impairments included a relatively manageable £140 million charge linked to economic uncertainty. Capital levels also came in slightly ahead of expectations.
The divergence in views reflects a familiar theme for UK banks. As UBS put it, “It’s clear that UK bank market fundamentals are far stronger than business and consumer sentiment implies: UK corporate loans are up 9.1% YoY. We expect those fundamentals to prove more defensive to the softer macro outlook than is priced.”