Investment bank downgrades Natwest amid profit warnings, share price slip and leadership questions
Shares in Natwest fell in early trading on Monday after the bank was downgraded to underperform from buy at Jefferies, with the broker noting weak third-quarter results.
The stock fell 1.8 per cent in London on Monday morning.
Jefferies said in a note that the market was reassessing the investment case for Natwest in the wake of earnings downgrades and lowered capital return expectations.
Natwest stock plunged as much as 18 per cent after reporting third-quarter results on Friday.
The bank’s net interest margin – the gap between lending rates and the interest it pays – slipped below three per cent as it responded to the end of global rate hikes.
Banks across the UK have warned that the boon from high interest rates over the past year is coming to an end as lenders compete to offer better deals.
Jefferies slashed its price target for the stock to 150p from 370p, implying 18 per cent downside.
The broker said higher-than-forecast inflation in risk-weighted assets suggested the market’s capital return expectations for the bank are too high.
Investors are also weighing a “debanking” row with Nigel Farage after an internal review found that former boss Dame Alison Rose made an “honest mistake” when she leaked confidential information about the former UKIP leader’s finances to the BBC.
Jefferies now expects £1.7bn in share buybacks in 2024 and 2025, compared to a prior forecast of £3.2bn.