BofA hails NatWest's 'sustainable quality' after Q4 profit beat

(Sharecast News) - Bank of America Securities has maintained a 'buy' rating and 500p target price for NatWest after the UK bank's better-than-expected fourth-quarter results on Friday, highlighting the "sustainable quality" of the business. NatWest's shares were down more than 3% at 423.5p in afternoon trade despite the company reporting an adjusted pre-tax profit of £1,539m for the fourth quarter, some 13% ahead (£177m) of the consensus forecast of £1,362m.

The beat largely reflected impairments coming in £137m below estimates, though results were still 3% ahead of forecasts when provisions are excluded.

Meanwhile, the company's guidance for 2025 was largely in line with market expectations, but the future dividend payout ratio was lifted to 50% from 40%, putting it towards the top end of the sector.

"We think Q424 results and the new guidance point to a story of sustainable quality. Income ex notable items was 4% ahead, with volume growth continue to be strong - in particular, Commercial and Institutional again grew by c.3% in one quarter (also up c.3% in Q324)," BofA said in a research note.

"While 2025 and 2027 guidance were not significantly ahead of consensus, they demonstrate confidence in the sustainability of returns. The shares are not particularly cheap at 1.2x consensus P/TBV25e, but we see scope for a simple, sustainable mid-teens ROTE bank to continue re-rating."