Investing.com — NatWest Group PLC (LON:) shares rose 4.6% on Monday after UBS upgraded its earnings forecasts for the British bank following strong fourth-quarter results and improved capital generation.
The Swiss bank maintained its “buy” rating and 780p price target on NatWest, suggesting a potential 40% total return. UBS raised its diluted earnings per share forecasts by 5% for 2026, 4% for 2027, and 3% for 2028.
According to UBS, NatWest’s fourth-quarter pre-tax profit, excluding notable items and litigation charges, exceeded consensus by 7%. Net interest income was 3% above expectations, while operating costs were in line with forecasts. Impairments performed 30% better than anticipated at 13 basis points of loans.
UBS noted “strong” momentum at NatWest, highlighting loan growth, deposit growth, and an 8 basis point improvement in net interest margin compared to the market’s expectation of a 2 basis point increase.
NatWest’s common equity tier 1 (CET1) ratio reached 14.0%, which was 30 basis points above consensus. This figure includes the £750 million buyback announced alongside the Evelyn Partners transaction.
The bank’s 2026 guidance aligns broadly with market consensus, while its new 2028 targets suggest 2-3% upside to market expectations and appear achievable, according to UBS.
These targets include return on tangible equity exceeding 18%, customer assets and liabilities growth of more than 4% compound annual growth, a cost-to-income ratio below 45%, and plans to operate with approximately a 13.0% CET1 ratio.