Can Natwest Shares Deliver Further Outperformance in 2025? Analysts Revise Up

NatWest shares (LON: NWG) have seen significant gains in 2024, outperforming the broader FTSE 100 index by more than 15x, whilst also leaving industry competitors such as Lloyds (LLOY), HSBC (HSBA) and Barclays (BARC) trailing. With gains of 81% year-to-date taking place against a backdrop of UK government stock sales, the delta appears even more impressive.

With this year almost in the rear-view, thoughts have turned to whether this strong performance can continue into 2025. Analysis suggests challenges may lie ahead for NatWest, possibly preventing it from repeating its success next year.

As Natwest has added more than 80% YTD, Barclays shares have seen impressive growth of 70%, whilst HSBC have added 22.9%, and Lloyds Bank shares 12.8%.

Analysts have been weighing in with price target shifts in the final quarter of the year, with broad sweeping strokes upwards. Deutsche Bank revised up to 460p (from 350p), Jefferies upgraded to Buy from hold with a target increase to 425p (from 140p), and Goldman Sachs initiated coverage at 440p with a Buy rating of their own.

Not be outdone, Citi (535p), Keefe Bruyette (440p), RBC Capital (390p), and JP Morgan (430p) have also upgraded price targets on Natwest since the most recent earnings print.

However, the landscape for 2025 could well look different. The Bank of England's decision to lower interest rates is anticipated to impact NatWest's lending margins, presenting a significant challenge.

Moreover, NatWest trades at higher multiples compared to Barclays and Lloyds, suggesting that its valuation may be stretched relative to peers. The UK government has also significantly reduced its stake in NatWest, which could influence future performance dynamics.

While NatWest had an exemplary performance in 2024, several headwinds could impede a similar trajectory in 2025. The combination of lower interest rates and a high current P/B ratio suggests that investors should proceed with caution. As a result, questions remain about whether NatWest can outperform the FTSE 100 next year amidst these evolving economic conditions.