NatWest Shares Surge 58% This Year: Will the Momentum Continue?

NatWest Group (LON: NWG) shares have experienced a more than 58% increase in value this year, prompting investors to question whether the upward trend will remain over the next few months.

The company's London Stock Exchange listed shares gained a further 3.9% on Friday last week, boosted by Goldman Sachs analyst Benjamin Caven-Roberts initiating the stock with a Buy rating.

The analyst believes the stock could reach 440p per share over the next 12 months, citing NWG's undervalued valuation and strong growth prospects.

According to Caven-Roberts, NatWest's current price-to-earnings (P/E) ratio of 7.3x and price-to-tangible book value (P/TBV) ratio of 1.0x are “inexpensive,” undervaluing the company compared to its peers.

The analyst anticipates a 10% compound annual growth rate (CAGR) in earnings per share over the next five years, surpassing the sector average.

The bank also believes NatWest's profitability outlook for 2026 and 2027 is particularly promising, with Goldman Sachs' net profit forecasts exceeding consensus estimates by 10% and 22%, respectively.

Caven-Roberts highlighted Natwest's resilience in the face of lower interest rates and its improved consistency of returns.

The analyst's positive assessment is further supported by his belief that management guidance and consensus are at “overly conservative levels.”

He emphasised the bank's resilience in the face of lower interest rates and its ability to maintain a strong capital position.

“Altogether, we forecast a 16% average ROTE over 2024-27E, and a 13% average annual capital return yield across dividends and buybacks — both of which screen above the sector average — all while maintaining a CET1 ratio >13%,” concluded Goldman Sachs.