NatWest: Lifting Fair Value Estimate to GBX 480 After Taking a Fresh Look

We revised our assumptions for NatWest and raise our fair value estimate to GBX 480. Primarily, our fair value increase rests on a significantly better net interest margin performance and continuously improving net interest income outlook. We had previously assumed that weakening deposit margins brought about by multiple base-rate cuts would more than negate the positive structural hedge effect. However, the opposite has been the case. Base-rate cuts have been less frequent than anticipated, and swap rates have held relatively stable. As a result, NatWest's loan portfolio has been rolling on to higher rates. Based on current swap rates, this effect should continue into 2027. As a result, we now assume net interest margins to expand to 240 basis points in 2027 from 213 basis points in 2024. Our no moat rating is unchanged.