NatWest Group PLC upgraded on expectation of improved returns
“Given capital and provisioning strength, cyclical revenue tailwinds and substantial capital
returns ahead, we see the UK banks as attractively valued,” UBS said
2022 is the year of UK bank delivery, according to UBS, which has upgraded NatWest Group PLC (LSE:NWG) to ‘buy’.
The Swiss bank said it is positive on the UK banks in both its base macroeconomic and geopolitical scenarios.
Base rate increase should result increase the net interest income (NII) of all the UK banks.
“Higher rates will improve returns on excess deposits and record levels of central bank reserves and TNAV [tangible net asset value], themselves driven by COVID-savings habits and QE (here),” UBS said.
“We expect NII to outperform near- and medium-term consensus,” it added.
UBS’s NII analysis suggests that 2023 consensus forecasts for Natwest are too low by 14% of profit before tax.
NatWest shares currently trade at 238.3p, up 8.4p, after UBS upgraded its sum of the parts-derived target price to 290p from 230p.
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