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Heading into 2025, some buyers may have famous the robust efficiency of NatWest Group (LSE:NWG). When together with dividends, it turned out to be the very best complete return inventory in all the FTSE 100 for 2024.
Based mostly on momentum, some may need thought it was a good suggestion to purchase £2k price of the FTSE 100 inventory. A yr down the road, right here’s how it could have panned out.
Continued momentum
Over the previous 12 months, NatWest shares have rallied an additional 61%. So the £2,000 funding would presently be price £3,220. That is fairly a good-looking return, particularly when you think about it’s virtually triple that of the broader index. The transfer to place cash within the scorching progress inventory at first of the yr definitely was rewarded.
In the midst of the yr, the financial institution delivered sturdy earnings progress with a number of quarters beating expectations. The newest buying and selling replace from October confirmed revenue jumped 16% versus the identical interval final yr. Its CEO commented that the outperformance was “underpinned by wholesome ranges of buyer exercise”.
One other issue that has helped the share value is a repricing of expectations concerning rates of interest right here within the UK. If we rewind a yr, some have been anticipating rates of interest to fall sharply. But in actuality, we haven’t seen as many cuts in 2025 as deliberate, partly as a result of inflation has remained sticky. This has been excellent news for NatWest, because it means the online curiosity margin has remained very wholesome.
The outlook for 2026
For individuals who didn’t purchase the expansion inventory final yr, the query is whether or not it may well ship a 3rd straight yr of bumper share value beneficial properties.
I anticipate extra stress to come back on the web curiosity margin, given the view of additional a number of cuts within the UK. After all, this view proved unsuitable in 2025, however I believe the UK economic system is in a weaker place than final yr, so the Financial institution of England committee might want to take steps to assist enhance GDP.
As rates of interest fall, NatWest inventory may benefit from elevated curiosity from revenue buyers. The present dividend yield of three.87% is above the index common. With the traditional dividend (excluding particular funds) having risen for 5 straight years, I believe the development might proceed. Due to this fact, the share value might rise as individuals hunt round for tactics to earn a better yield on their cash.
Lastly, even with the robust rally, the price-to-earnings ratio sits at 12.30. The FTSE 100 common is eighteen.2, so at a relative degree, the inventory might nonetheless be seen as undervalued. This might assist stop it from seeing any critical crashes, as worth buyers will rush in to purchase the dip.
Total, shopping for NatWest shares a yr again would have paid off very effectively. Wanting forward, dangers have risen, however I nonetheless imagine it may well proceed to understand, making it a inventory for buyers to contemplate.
