NatWest Group PLC shares advanced 4.6% on Monday following an updated earnings outlook from UBS that lifted diluted earnings-per-share projections for multiple years and retained a positive stance on the stock.
Analyst action and market reaction
UBS maintained its "buy" rating and a price target of 780p on NatWest, a level the bank says implies roughly a 40% total return from current levels. Alongside that rating, UBS raised its diluted EPS forecasts by 5% for 2026, 4% for 2027 and 3% for 2028, a revision that preceded the share-price uplift.
Fourth-quarter performance
In its review, UBS said NatWest's fourth-quarter pre-tax profit, excluding notable items and litigation charges, came in about 7% ahead of consensus. Net interest income (NII) beat expectations by 3%, operating expenses were largely in line with forecasts, and impairment charges were markedly lighter than anticipated, performing 30% better than expected at 13 basis points of loans.
UBS highlighted the bank's operational momentum, pointing to loan and deposit growth and a notable improvement in net interest margin. The bank reported an 8 basis point improvement in NIM versus the market's expected 2 basis points increase.
Capital position and buyback
NatWest's common equity tier 1 (CET1) ratio reached 14.0%, which UBS noted was 30 basis points above consensus forecasts. That CET1 figure incorporates a £750 million buyback the bank announced in conjunction with the Evelyn Partners transaction.
Guidance and targets
UBS said NatWest's guidance for 2026 is broadly in line with market consensus. The bank's newly disclosed 2028 targets, according to UBS, imply roughly 2-3% upside versus current market expectations and are viewed as achievable. Those targets include:
- Return on tangible equity above 18%
- Customer assets and liabilities growing at more than 4% compound annual growth
- Cost-to-income ratio below 45%
- Operating with an approximate 13.0% CET1 ratio
Outlook
UBS's combination of upward EPS revisions, positive commentary on near-term performance metrics and a continued buy rating underpinned the market response. The brokerage's analysis places emphasis on stronger capital generation and improved margin dynamics as drivers behind the revised outlook.
Note: This report presents the details of UBS's updated forecasts and NatWest's reported metrics as communicated in the reviewed statements.