NatWest: Reducing Our Fair Value Estimate Slightly as We Expect Further NIM Pressure Over 2024

We reduce our fair value estimate for NatWest to GBX 280 per share from GBX 300 per share previously. The largest change after refreshing our model has been adjustments to our net interest margin, or NIM, assumptions. The Bank of England is likely to start cutting the base rate in 2024, which should lower deposit funding spreads. At the same time, however, we don't expect a material reprieve from the current interest rate passthrough U.K. banks are experiencing due to the higher level of interest rates. The structural hedge will continue to form a tailwind for the net interest margin, but in sum we anticipate the net interest margin to retract from about 305 basis points in 2023 to about 285 basis points in 2025.