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I knew NatWest (LSE: NWG) shares had been heating up properly, however I didn’t realise simply how a lot smoke they had been throwing off.
The FTSE 100 excessive avenue financial institution has been again within the headlines because the Treasury lastly bought off the final of its stake. For the primary time for the reason that monetary disaster, NatWest is fully in personal arms.
The controversy over the 2008 bailout nonetheless rumbles on. Taxpayers misplaced round £10bn, however letting Royal Financial institution of Scotland (because it then was) go below would have been an enormous threat.
Buyers who purchased within the years after the crash could have questioned whether or not it ought to have been left to rot. The shares had been useless cash for ages.
FTSE 100 restoration play
However that’s all modified. Over the past 5 years, the NatWest share worth has jumped 306%.
That quantity wants context. 5 years in the past, the world was in lockdown, the economic system frozen and banks bracing for a wave of mortgage defaults. NatWest shares had been on the ground. In order that flatters the determine.
Nonetheless, the final yr has been fairly beautiful, with the top off 67%.
But the story isn’t nearly progress. Even after that rally, NatWest shares nonetheless provide a beneficiant yield of 4.09%. Analysts reckon that may rise to five.25% this yr and 6.12% by 2026.
Earlier at present, I screened the FTSE 100 for the most important dividend growers of the final 5 years. NatWest was nearly on the prime, with a compound annual dividend progress price of 60.8%.
The element is value digging into. In 2019, NatWest rebased its dividend, chopping it by two-thirds to simply 2p per share. So once more, it was ranging from a low base. However since then, progress has been stellar – together with a 250% enhance in 2021, as my desk reveals.
| Yr | Complete | Development |
| 2019 | 2p | -63.64% |
| 2020 | 3p | 50.0% |
| 2021 | 10.5p | 250.0% |
| 2022 | 13.5p | 28.57% |
| 2023 | 17p | 25.93% |
| 2024 | 21.5p | 26.47% |
Buyers with longer reminiscences haven’t forgotten that the financial institution didn’t pay a penny in dividends between 2008 and 2017. It’s had lots of catching as much as do. Higher late than by no means.
Prime revenue inventory
Q1 2025 outcomes, revealed on 2 Could, confirmed a 38% rise in working revenue earlier than tax to £1.8bn, beating consensus estimates of £1.6bn. Return on capital remained robust, and mortgage lending has held up.
That stated, dangers stay. The UK economic system continues to be struggling. Rates of interest could keep larger for longer, hurting mortgage demand. If charges fall, that’ll squeeze financial institution margins.
NatWest isn’t the swashbuckling progress inventory it as soon as was. It’s had its wings clipped for the reason that crash. CEO Paul Thwaite is pushing the Treasury to calm down ring-fencing guidelines that separate retail banking from riskier funding banking. That would change the image. Time will inform.
For now, NatWest nonetheless appears to be like actually good worth, buying and selling at round 10 occasions earnings. The large share worth good points could also be behind us. However with regular revenue, robust money returns, and a lower-risk profile, there may nonetheless be extra to come back. I nonetheless suppose NatWest shares are value contemplating at present.
