We Raise our Fair Value Estimate for NatWest to GBX 300 per Share on Higher net Margin Assumptions

We raise our fair value estimate for NatWest Group to GBX 300 per share from GBX 230 previously. The primary driver of our fair value adjustment stems from materially higher net interest margin assumptions on the back of the rapid rate hike cycle by the Bank of England. We now anticipate the banking net interest margin to grow to 2.8% in 2022 versus just 2.4% last year, before hitting about 3% by 2025. We have also lowered our mid-cycle loan loss assumption down to 40 basis points from 45 basis points, which however still sits well above the 20 to 30 basis points management believes the bank will book on a through-the-cycle basis. Our no moat rating is unchanged.