NatWest: We're Raising Our Fair Value Estimate as We See Bank's Franchise Value Strengthening21 Mar 2026 18:20
Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.
Key Morningstar Metrics for NatWest Group
•
Fair Value Estimate: GBX 710
•
Morningstar Rating: ★★★
•
Morningstar Economic Moat Rating: Narrow
•
Morningstar Uncertainty Rating: Medium
We raise our fair value estimate for NatWest Group NWG after incorporating good fourth-quarter results and lifting our midcycle profitability assumptions.
Why it matters: NatWest closed 2025 with a good fourth quarter. Return on tangible equity of 18% was strong, carried by sequential growth in net interest income and low impairment losses. Widening deposit margins stood out positively.
•
The structural hedge remains a stronger tailwind than we had anticipated. Current market rates imply increasing yields through 2030, albeit with a diminishing positive impact. This extended visibility drove us to lift our midcycle assumptions for NatWest.
•
The Evelyn Partners acquisition introduces execution risk but is the correct move in our view. The acquisition should strengthen Natwest’s noninterest-based income stream, a potentially attractive deployment of capital if revenue and cost synergy targets are hit.
The bottom line: We increase our fair value estimate to GBX 710 per share from GBX 550 per share previously. As a result, NatWest screens as the most attractive UK bank in our coverage.
•
We raise our midcycle assumptions for returns on tangible equity to 15% from 14% previously. The change is predominantly driven by a more prolonged net interest income benefit from the structural hedge and improved deposit franchise assumptions.
•
We believe that the valuation gap between Lloyds and NatWest on a relative basis is not justified. While Lloyds’ franchise value is adequately reflected in current share prices, we see an opportunity for valuation convergence as NatWest’s franchise continues to strengthen.
Sign In
Follow the stocks
