RBSpF - NatWest: Recent Rally Leaves Shares Fully Valued (Rating Downgrade)

2024-05-10 23:42:08 ET

Summary

• Shares of British bank NatWest have risen sharply since my last update, significantly outperforming its European peer group.
• Q1 results were strong. While asset quality largely drove the bottom-line beat, net interest income and margin were both better than expected, with recent headwinds easing.
• As a result of the strong share price performance, NatWest has now re-rated to around 1.1x tangible book value, leaving little margin of safety relative to management's medium-term profitability goals.

British bank NatWest ( NWG ) has been on a strong run since I last covered it following Q4 2023 results, significantly outperforming wider European financials ( EUFN ) in that time with a circa 43% total return. This strong recent run brings the stock's total return to approximately 65% since I opened on it with a 'Buy' rating back in Q3 2021, equating to a circa 20% annualized return in a little under three years....

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