Shares of NatWest Group moved up 4.6% on Monday after UBS lifted its earnings forecasts for the British bank. The upgrade followed solid fourth quarter results and better than expected capital generation.
UBS kept its buy rating on the stock. It also maintained a price target of 780p. That suggests a possible total return of around 40% from current levels. The broker raised its diluted earnings per share estimates by 5% for 2026, 4% for 2027 and 3% for 2028.
The fourth quarter numbers impressed analysts. Pre tax profit, excluding one off items and legal charges, came in 7% higher than market expectations. Net interest income was 3% above forecasts. Operating costs were in line with what analysts had predicted.
Loan impairments were much better than expected. They came in 30% lower than forecasts at 13 basis points of total loans. This suggests that borrowers are holding up relatively well.
UBS described the overall momentum at NatWest as strong. Loan growth and deposit growth both improved. Net interest margin also rose by 8 basis points. The market had expected only a 2 basis point increase.
The bank’s common equity tier 1 ratio stood at 14.0%. That was 30 basis points above consensus estimates. This figure already includes the £750 million share buyback announced alongside the Evelyn Partners deal.
Looking ahead, NatWest’s 2026 guidance is broadly in line with market expectations. Its new targets for 2028 are slightly more ambitious. UBS believes they imply around 2 to 3% upside compared to current forecasts and appear achievable.
The bank is aiming for a return on tangible equity above 18%. It also wants customer assets and liabilities to grow by more than 4% on a compound annual basis. Another goal is to keep its cost to income ratio below 45%. Over time, it plans to operate with a CET1 ratio of around 13.0%.
Overall, the latest results and upgraded forecasts have boosted confidence that NatWest is on a steady path of growth and improving returns.