Analysts at J.P. Morgan have favoured the FTSE 100-listed NatWest Group (GB:NWG) as a preferred choice of investment in the new environment marked by interest rate cuts. Analyst Raul Sinha from J.P. Morgan upgraded his rating on the stock from Hold to Buy while raising the share price forecast from 230p to 280p. The price target implies a growth potential of almost 35% in the share price.
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According to J.P. Morgan, NatWest appears appealing compared to its peer Lloyds Banking Group PLC (GB:LLOY). Sinha reiterated his Sell rating on Lloyds stock yesterday.
Similarly, Barclays also recently selected NatWest as their preferred option over Lloyds earlier this month. On November 17, Barclays analyst Aman Rakkar and his team upgraded their rating on NWG stock from Hold to Buy, expressing optimism about a substantial profit rebound.
A Sigh of Relief
The news came as a relief for NatWest’s investors after months of turmoil, signalling signs of a turnaround for the bank. The stock gained around 0.68% yesterday in trading. Year-to-date, the stock has experienced an 18% decline in value. This is mainly attributed to the Silicon Valley banking fiasco, followed by the banking scandal involving Nigel Farage, the former leader of the UK Independence Party. This crisis ultimately led to the resignation of the ex-CEO of the bank, Alison Rose.
Even though the management changes and the scandals have hurt NatWest’s valuation, J.P. Morgan expressed a high level of confidence regarding the bank and its future prospects. It expects NatWest’s NIM (net interest income) “to stabilize in the first half of 2024.”
In its third-quarter results for FY23, the bank achieved a pre-tax profit of £1.3 billion, up from £1.1 billion in the same quarter a year ago. The NIM witnessed a decrease of 19 basis points, reaching 2.94% compared to the previous quarter.
Is NatWest a Good Share to Buy?
According to TipRanks, the NWG stock has a Moderate Buy rating, which is based on a total of 12 recommendations. This includes eight Buy, three Hold, and one Sell recommendation. The NatWest share price forecast is 272.5p, implying a growth of 31% on the current trading levels.
