Picture supply: NatWest Group plc
NatWest (LSE: NWG) shares have had a stellar run over the previous yr, rewarding shareholders with a 58% achieve since August 2024. A mix of revenue development, privatisation, capital returns and structural change has helped drive that efficiency.
And it’s not simply the capital beneficial properties which have made shareholders smile. The financial institution additionally pays a wholesome dividend, averaging round 4.5% over the previous yr, making it a profitable addition to many an revenue portfolio.
So what would an funding of £5,000 in August final yr appear to be as we speak? Accounting for each capital beneficial properties and dividends, a £5,000 funding would now be price roughly £8,300. That’s a revenue of £3,300 in simply 12 months, equal to round £275 a month.
Annoyingly, I offered my shares final August. Ouch! However the true challenge now’s whether or not it’s too late to purchase again in.
Spectacular momentum
NatWest’s current half-year outcomes counsel the momentum is probably not slowing. Attributable revenue hit £2.5bn, with earnings per share up 28% yr on yr. Return on tangible fairness (RoTE) reached 18.1%, considerably forward of prior steering. Effectivity additionally improved, with the cost-to-income ratio falling from 55.5% to 48.8%.
Shareholders have been rewarded handsomely. The interim dividend rose from 6p to 9.5p per share, whereas administration unveiled a £750m share buyback programme. That’s on prime of the present yield, already a draw for income-focused traders.
Absolutely personal and forging forward
One of many massive milestones in 2025 was the financial institution’s return to full personal possession. In Might, the federal government offered its closing stake, ending practically 17 years of state involvement following the monetary disaster bailout.
This has lifted a lingering overhang on the shares. With the state out of the way in which, investor confidence has returned strongly — and that’s been an enormous driver of the current rally.
Past privatisation, NatWest has been busy reshaping its future. The acquisition of Sainsbury’s Financial institution has boosted buyer numbers and deposits. In the meantime, it’s investing closely in digital transformation and even partnering with synthetic intelligence gamers to modernise its providers.
One other plus is its UK focus. By concentrating on retail and service-sector debtors, it’s much less uncovered to world commerce tensions and tariff disputes that hassle extra internationally oriented banks.
Price contemplating… with warning
Traders are rallying behind NatWest as a result of it’s delivering sturdy income, effectivity enhancements, compelling shareholder returns and a clear reset post-privatisation.
Even with the current development, its valuation nonetheless seems undemanding, buying and selling on a price-to-earnings (P/E) ratio of round 10. Analysts anticipate earnings to proceed rising at roughly 10% a yr, as they’ve accomplished since 2021, and the common 12-month worth goal sits 6% greater than as we speak’s share worth.
That stated, the UK focus additionally carries danger. With most of its revenues tied to home lending, a slowdown within the UK economic system, rising unemployment, or a housing market dip might shortly feed by means of into greater defaults and decrease earnings.
Like all banks, NatWest’s additionally susceptible to regulatory adjustments, significantly in areas equivalent to client credit score or high-cost lending. However general, I feel the financial institution’s well-executed turnaround, mixed with a powerful dividend coverage, makes it price contemplating as a part of a diversified revenue portfolio.
I simply want I hadn’t offered my shares final August.
