Company Overview - NatWest Group (NWG) is headquartered in London and has experienced a price change of 17.9% this year [3] - The company currently pays a dividend of $0.38 per share, resulting in a dividend yield of 6.35%, which is significantly higher than the Banks - Foreign industry's yield of 3.7% and the S&P 500's yield of 1.59% [3] Dividend Performance - The current annualized dividend of $0.76 represents a 72.7% increase from the previous year [4] - Over the last 5 years, NatWest Group has increased its dividend 4 times year-over-year, with an average annual increase of 41.06% [4] - The company's current payout ratio is 23%, indicating that it paid out 23% of its trailing 12-month earnings per share as dividends [4] Earnings Growth - The Zacks Consensus Estimate for NatWest Group's earnings for 2025 is $1.42 per share, reflecting a year-over-year growth rate of 6.77% [5] Investment Appeal - NatWest Group is considered a compelling investment opportunity due to its attractive dividend yield and strong Zacks Rank of 1 (Strong Buy) [7]

Core Industry Insights - The Zacks Foreign Banks Industry is undergoing restructuring to focus on core operations, which is expected to elevate expenses initially but drive long-term growth [1][5] - The industry is facing uneven economic recovery globally, impacting revenue growth, but lower interest rates are anticipated to provide support [1][6] Key Themes Influencing the Industry - **Lower Interest Rates**: Central banks are lowering interest rates, which is expected to support net interest income (NII) and margins for foreign banks, leading to improved loan demand and revenue growth [4] - **Restructuring Efforts**: Many foreign banks are divesting non-core operations to enhance focus on profitable markets, changing their revenue mix [5] - **Global Economic Recovery**: The post-COVID-19 economic recovery has been uneven, which may affect profitability for foreign banks in the near term [6] Industry Performance and Outlook - The Zacks Foreign Banks Industry ranks 47, placing it in the top 19% of over 250 Zacks industries, indicating positive near-term prospects [7][8] - Aggregate earnings estimates for the industry have been revised upward by 4.2% since November 2024, reflecting growing analyst confidence [9] Stock Performance - The Zacks Foreign Banks Industry has outperformed the S&P 500 and the broader finance sector, with a collective stock rise of 22.9% over the past year [11] Valuation Metrics - The industry has a trailing 12-month price-to-tangible book ratio (P/TBV) of 2.38X, significantly lower than the S&P 500's 12.97X, indicating a discount compared to the broader market [14][16] Company Highlights - **HSBC**: With $3.02 trillion in assets, HSBC is focusing on Asia and has initiated restructuring to achieve $1.5 billion in annualized savings by 2026, while winding down non-core investment banking activities [18][20][21] - **Barclays**: Holding £1,518.2 billion ($1,897.8 billion) in assets, Barclays has seen a decrease in operating expenses and aims for gross efficiency savings of £2 billion by 2026 [24][25][26][27] - **NatWest**: NatWest is launching a Fintech Growth Programme and expects to achieve a return on tangible equity of 15-16% by the end of 2025, with shares rising 29.2% in the past six months [29][30][31]

Market Overview - U.S. stocks experienced a decline in February, with the S&P 500 falling by 2%, the Nasdaq Composite dropping by 5.4%, and the Dow Jones Industrial Average decreasing by 2.8% [1] - The Financial Services sector was a standout performer, increasing by 1.7% during the same period [1] Selected Finance Stocks - Three finance stocks were identified as outperformers in February: Barclays (BCS), NatWest Group (NWG), and Mr. Cooper Group (COOP), all of which exceeded the performance of the S&P 500 Index [2] Economic Concerns - The U.S. stock market is facing challenges due to economic health concerns and uncertainties related to the Trump administration's policies [5] - President Trump's trade policies, including a 20% tariff on Chinese imports and a 25% import tax on steel and aluminum, are contributing to inflationary pressures that may hinder economic growth [6] Barclays (BCS) - Barclays is focusing on simplifying operations and core business areas, having divested its Germany-based consumer finance business in February 2025 [9] - The company aims for gross efficiency savings of £0.5 billion in 2025 and a total of £2 billion by the end of 2026 [10] - Earnings for 2025 and 2026 are projected to grow by 9.8% and 25.9% year over year, respectively, with a current market cap of $57.11 billion and a Zacks Rank of 1 [11] NatWest Group (NWG) - NatWest operates in various banking and financial services, including personal and business banking, consumer loans, and insurance [11] - The company is launching its first Fintech Growth Programme to support fintech startups, and it has made progress in growing its customer businesses and improving productivity [12] - Expected return on tangible equity is 15-16% by the end of 2025, with earnings projected to rise by 7% and 13.7% in 2025 and 2026, respectively, and a market cap of $49.3 billion [13] Mr. Cooper Group (COOP) - Mr. Cooper Group is expanding through acquisitions, including the $1.3 billion acquisition of Flagstar Bank N.A.'s mortgage operations [14] - The company reported total assets of $18.9 billion, a 16% sequential increase, with cash and cash equivalents rising by 2.8% [15] - Earnings for 2025 and 2026 are expected to grow by 27% and 18.3% year over year, respectively, with a market cap of $7.2 billion and a Zacks Rank of 2 [15]

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, aiming to buy high and sell even higher, with the expectation that established trends will continue [1] Company Overview: NatWest Group (NWG) - NatWest Group currently holds a Momentum Style Score of B, indicating a favorable position in momentum investing [3] - The company has a Zacks Rank of 1 (Strong Buy), which historically outperforms the market when combined with a Style Score of A or B [4] Performance Metrics - Over the past week, NWG shares increased by 5.26%, significantly outperforming the Zacks Banks - Foreign industry, which rose by only 0.17% [6] - In a longer timeframe, NWG shares have appreciated by 11.07% over the past month, compared to the industry's 5.62% [6] - Over the last quarter, NWG shares rose by 15.88%, and over the past year, they gained an impressive 98.03%, while the S&P 500 saw movements of -0.72% and 18.98%, respectively [7] Trading Volume - The average 20-day trading volume for NWG is 3,464,793 shares, which serves as a bullish indicator when combined with rising stock prices [8] Earnings Outlook - In the past two months, one earnings estimate for NWG has increased, while none have decreased, raising the consensus estimate from $1.35 to $1.42 [10] - For the next fiscal year, one estimate has also moved upwards with no downward revisions during the same period [10] Conclusion - Considering the positive performance metrics and earnings outlook, NWG is positioned as a 1 (Strong Buy) stock with a Momentum Score of B, making it a strong candidate for near-term investment [12]

Core Viewpoint - NatWest Group (NWG) has been upgraded to a Zacks Rank 1 (Strong Buy) due to an upward trend in earnings estimates, which is a significant factor influencing stock prices [1][2]. Earnings Estimates and Stock Price Movement - The Zacks rating system is based on changes in earnings estimates, which are strongly correlated with near-term stock price movements [3][5]. - Institutional investors utilize earnings estimates to determine the fair value of stocks, leading to buying or selling actions that affect stock prices [3]. Business Improvement Indicators - The increase in earnings estimates for NatWest indicates an improvement in the company's underlying business, which is expected to positively influence its stock price [4][9]. - Analysts have raised their earnings estimates for NatWest, with the Zacks Consensus Estimate increasing by 5.2% over the past three months [7]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [6][8]. - NatWest's upgrade to Zacks Rank 1 places it in the top 5% of Zacks-covered stocks, indicating a strong potential for market-beating returns in the near term [9].

Financial Performance - NatWest Group reported an income of £14,703 million for 2024, slightly down from £14,752 million in 2023[21]. - Profit before tax for the year was £6,195 million, compared to £6,178 million in 2023[21]. - The return on tangible equity was 17.5%, slightly down from 17.8% in 2023[22]. - NatWest Group achieved a strong financial performance in 2024, with income excluding notable items of £14.6 billion and a return on tangible equity (RoTE) of 17.5%[77]. - Total income excluding notable items for 2024 was £14,648 million, reflecting a 2.2% increase compared to 2023, driven by deposit margin expansion and lending growth[116]. - Total income for Retail Banking decreased to £5,650 million in 2024 from £5,931 million in 2023, representing a decline of 4.7%[163]. Customer Growth and Engagement - The operating profit before tax increased to £6.2 billion, and the bank welcomed approximately 500,000 new customers[78]. - In 2024, NatWest Group added approximately 500,000 new customers in Retail Banking, around 10,000 in Commercial & Institutional, and saw a 26% increase in referrals in Private Banking[115]. - The number of active mobile app users reached 10.5 million, with an average of 33 logins per month, indicating strong user engagement[165]. - NatWest Group serves over 19 million customers across its retail, private, and commercial banking sectors[160]. Loans and Deposits - Loans to customers increased to £400.3 billion, up from £381.4 billion in 2023, reflecting a growth of 5.0%[21]. - Customer deposits rose to £433.5 billion, a marginal increase from £431.4 billion in 2023[21]. - The bank's lending to business customers grew by £10 billion, and it welcomed 91,000 new start-ups in 2024[80]. - Customer deposits increased to £194.8 billion in 2024, up from £188.0 billion in 2023, marking a growth of 8.8%[163]. Shareholder Returns - Total capital returned to shareholders reached £4.0 billion, an increase from £3.6 billion in 2023[22]. - The bank returned £4.0 billion to shareholders through dividends and buybacks, with dividends per share increasing by 26%[79]. - The ordinary dividend per share increased to 21.5 pence in 2024, reflecting a 26% rise from 2023[147]. - Total buybacks in 2024 amounted to £2.2 billion, representing a 9% increase compared to 2023[147]. - The bank plans to increase its ordinary dividend payout ratio from approximately 40% to 50% starting in 2025[79]. Capital and Ratios - The Common Equity Tier 1 (CET1) ratio improved to 13.6%, compared to 13.4% in 2023[24]. - The Common Equity Tier 1 (CET1) ratio improved to 13.6%, up 20 basis points from 2023, primarily due to attributable profit[116]. - The loan impairment rate was 9 basis points in 2024, significantly lower than the 19 basis points average from 2018 to 2023[115]. Technology and Innovation - NatWest Group invested over £1.1 billion in 2024 to enhance technology capabilities and better serve customers[93]. - The bank's strategy focuses on becoming more technology-enabled and simplifying operations to better serve customer needs[50]. - The implementation of Generative AI-enabled tools has allowed advisors to spend more time with clients[200]. Climate and Sustainable Funding - NatWest Group aims to provide £100 billion in climate and sustainable funding by the end of 2025, having already provided £93.4 billion[37]. - NatWest Group provided £31.5 billion in climate and sustainable funding in 2024, reaching a cumulative total of £93.4 billion towards its £100 billion target by the end of 2025[82]. - NatWest Group provided £93.4 billion in climate and sustainable funding and financing towards a £100 billion target set for the period from July 2021 to the end of 2025[115][126]. Market Position and Strategy - The UK Government's shareholding in NatWest Group decreased from approximately 38% in December 2023 to 9.99% in December 2024, with expectations for complete divestment by 2025[59][60]. - NatWest Group's strategy focuses on disciplined growth, simplification, and active balance sheet management to create shareholder value[76]. - NatWest Group's strategy focuses on disciplined growth, simplification, and active balance sheet management to deliver attractive returns to shareholders[143]. - The bank's new intellectual property-backed lending initiative aims to support high-growth businesses lacking traditional fixed assets[136]. Customer Satisfaction - The Net Promoter Score (NPS) for Retail Banking increased from 21 in Q4 2023 to 23 in Q4 2024, indicating improved customer satisfaction[122]. - NatWest Group's digital engagement remained high, with 79% of Retail Banking customers banking entirely digitally in 2024, up from 77% in 2023[115].

Financial Reporting and Standards - NatWest Group's financial statements are prepared in accordance with UK-adopted International Accounting Standards and International Financial Reporting Standards[18]. - Non-IFRS measures and alternative performance measures are included to provide a consistent basis for comparing business performance[13]. - The financial information spans pages 162-263, detailing consolidated statements and significant changes[8]. - The document outlines the organizational structure and business overview of NatWest Group[4]. - Major shareholders and related party transactions are discussed on pages 305-310[7]. Forward-Looking Statements and Risks - The document includes forward-looking statements regarding NatWest Group's financial condition, strategic priorities, and sustainability-related targets[9]. - Key risks affecting NatWest Group's future results include economic and political risks, changes in interest rates, and operational resilience risks[11]. - The document includes a cautionary statement regarding the inherent risks and uncertainties of forward-looking statements[10]. Sustainability and Climate Goals - The company aims to achieve net zero across financed emissions, assets under management, and operational value chain by 2050[15]. - The company emphasizes the importance of climate and sustainability-related disclosures, which are subject to change over time[15]. - Climate and sustainable funding and financing reached £93.4 billion against a target of £100 billion by the end of 2025, with £31.5 billion provided in 2024[38]. - Commercial & Institutional provided £27.8 billion in climate and sustainable funding to support customers transitioning to net zero[92]. Financial Performance - NatWest Group reported total income of £14.7 billion for 2024, a decrease of 0.3% compared to 2023, while total income excluding notable items increased by 2.2% to £14.6 billion[32]. - The return on equity (RoE) was 11.9% and the return on tangible equity (RoTE) was 17.5% for the year[31]. - Net loans to customers increased by £18.9 billion to £400.3 billion, with significant growth in Commercial & Institutional lending[37]. - Customer deposits rose by £2.1 billion to £433.5 billion, with a £6.8 billion increase in Retail Banking deposits[39]. - The CET1 ratio improved to 13.6%, reflecting a 20 basis point increase from 2023, supported by attributable profit[40]. - Total operating expenses increased by £153 million to £8.1 billion, driven by higher staff costs due to inflation[33]. - Earnings per share attributable to ordinary shareholders increased to 53.5 pence, a rise of 5.6 pence from the previous year[44]. - Total assets grew by 2.2% to £708.0 billion, with loans to customers increasing by 5.0% to £400.3 billion[50]. Credit and Impairment - The net impairment charge was £359 million, representing 9 basis points of gross customer loans, with stable default levels[35]. - The expected credit loss (ECL) coverage ratio decreased from 0.93% to 0.83%, while ECL provisions decreased by £0.2 billion to £3.4 billion[65]. - Impairment losses for 2024 were £359 million, compared to £578 million in 2023, reflecting a decrease of 37.9%[75]. - The loan impairment charge for Retail Banking decreased to £282 million, down £183 million or 39.4% from 2023, reflecting improved credit quality[83]. Risk Management - The bank emphasizes a strong risk management framework, ensuring governance and capabilities are in place to manage principal risks effectively[111][112]. - Risk appetite is defined to establish the levels of tolerance for various risks, supporting sound risk-taking aligned with strategic objectives[113][135]. - The three lines of defence model is employed to delineate responsibilities for risk management, with the first line managing direct risks, the second line providing oversight, and the third line offering independent assurance[127][130][133]. - NatWest Group's risk management framework is reviewed and approved annually by the Board, ensuring alignment with overall strategic objectives[112]. - The bank's risk culture promotes intelligent risk-taking, focusing on robust risk management behaviors to enhance customer outcomes and business sustainability[116][119]. Customer Segments and Business Overview - NatWest Group operates across various customer segments including Business Banking, Commercial Mid-market, and Corporate & Institutions, providing comprehensive financial services domestically and internationally[104]. - The bank faces competition from UK banks, specialist finance providers, and fintechs, particularly in the business banking market, which intensifies customer engagement efforts[105][107]. - NatWest Group's Corporate and Institution business competes with large domestic and international banks, offering financing and risk solutions to corporates in the UK, Western Europe, and the US[106]. Operational Highlights - Retail Banking reported a total income of £5.65 billion, a decrease of £281 million or 4.7% compared to 2023, primarily due to asset margin compression and a shift in deposit balance mix[81]. - Operating profit for Retail Banking was £2.43 billion, down £207 million or 7.8% from the previous year, with a return on equity of 19.9%[81]. - Private Banking achieved an operating profit of £264 million, with a return on equity of 14.2%, and saw assets under management (AUMA) increase by 19.9% to £48.9 billion[86]. - Commercial & Institutional's total income rose to £7.96 billion, an increase of £536 million or 7.2%, supported by a net interest income growth of 5.8%[89].

Group 1 - NatWest Group (NYSE: NWG) reported reasonable figures for its fourth quarter, although financials were slightly below consensus expectations [1] - The market has been catching up recently, indicating a positive outlook for the bank [1] - The investment approach favored is long-term, buy-and-hold, focusing on stocks that can sustainably deliver high-quality earnings, particularly in the dividend and income sectors [1]

Core Viewpoint - NatWest Group (NWG) is currently viewed as a better value opportunity compared to United Overseas Bank Ltd. (UOVEY) based on various financial metrics and Zacks Rank evaluations [1][3][7] Valuation Metrics - NWG has a Zacks Rank of 1 (Strong Buy), indicating a stronger earnings outlook compared to UOVEY, which has a Zacks Rank of 3 (Hold) [3] - The forward P/E ratio for NWG is 7.21, while UOVEY's forward P/E is 10.12, suggesting NWG is undervalued relative to UOVEY [5] - NWG's PEG ratio is 0.71, indicating a favorable valuation when considering expected earnings growth, whereas UOVEY's PEG ratio is 1.92 [5] - NWG has a P/B ratio of 0.82, compared to UOVEY's P/B ratio of 1.35, further supporting NWG's valuation advantage [6] - Based on these metrics, NWG earns a Value grade of B, while UOVEY receives a Value grade of D [6] Earnings Outlook - NWG is noted for its improving earnings outlook, which enhances its attractiveness in the Zacks Rank model [7]

Financial Data and Key Metrics Changes - The company upgraded its full-year income and returns guidance, expecting total income, excluding notable items, to be around GBP 14.4 billion, with a return on tangible equity greater than 15% [2][15] - For the first nine months, customer lending grew by GBP 8.1 billion to GBP 367 billion, while customer deposits increased by GBP 8.3 billion to GBP 427 billion [2][3] - Operating profit for the first nine months was GBP 4.7 billion, with attributable profit of GBP 3.3 billion and a return on tangible equity of 17% [5] Business Line Data and Key Metrics Changes - In Commercial & Institutional, lending to mid-market customers grew by GBP 1.5 billion, while corporate lending increased by GBP 3.2 billion [10] - The private bank's assets under management rose by GBP 5.7 billion to GBP 46.5 billion, including GBP 2.2 billion of net new inflows [4] - The existing mortgage book returned to growth, with balances up by GBP 3.8 billion, supported by new lending and the acquisition of a GBP 2.3 billion mortgage portfolio from Metro Bank [9] Market Data and Key Metrics Changes - The group net interest margin increased by 8 basis points to 218 basis points, driven by margin expansion across deposits and funding [8] - Non-interest income grew by 5.1% to GBP 3.8 billion in Q3, with contributions from strong lending and payment fees [7][57] - The company reported a net impairment charge of GBP 245 million for Q3, reflecting a cost of risk of 25 basis points [12] Company Strategy and Development Direction - The company is focused on disciplined growth, bank-wide simplification, and active balance sheet and risk management [2] - The strategic priority includes supporting customers while managing risks effectively, which is reflected in the strong financial performance [2][16] - The company aims to reach a target of GBP 100 billion in climate and sustainable funding by 2025, having already provided GBP 85.4 billion since July 2021 [3] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business's momentum and ability to deliver strong shareholder returns, despite expected base rate cuts [16] - The company anticipates further base rate cuts in Q4, reaching 4.75% by year-end, with additional cuts expected in 2025 [8] - Management highlighted the resilience of customers and the strong performance of the loan portfolio, maintaining a low cost of risk [30] Other Important Information - The government has reduced its shareholding from 38% to under 16%, with plans to exit fully by 2025-2026 [5] - The company expects to incur higher operating expenses in Q4 due to severance and property costs, alongside a higher bank levy charge [12] Q&A Session Summary Question: On margins and NatWest Markets - Inquiry about the impact of deposit spreads and the timing of base rate cuts on future margins [17] - Management noted that market conditions have been supportive for NatWest Markets, which has seen a significant increase in capital markets activity [20] Question: Revenue guidance for Q4 - Question regarding the expected decline in revenues sequentially into Q4 and the normalization of other income [24] - Management explained that Q4 income is expected to be lower due to seasonality and anticipated base rate cuts, but overall guidance has been upgraded [26] Question: Cost of risk and Sainsbury's transaction - Inquiry about the cost of risk trends and the potential contribution of the Sainsbury's transaction to P&L [29] - Management confirmed a low cost of risk and indicated that the Sainsbury's acquisition is expected to be RoTE accretive upon completion [31] Question: RWA guidance and loan growth - Questions about RWA guidance for 2025 and confidence in loan growth prospects [35] - Management expressed confidence in mid-single digit loan growth, supported by strong performance in Q3 [36] Question: Deposit repricing lag and customer behavior - Inquiry about the impact of deposit repricing lag in Q3 and customer behavior regarding term deposits [48] - Management acknowledged the lag effects and noted that many customers are renewing into fixed-term accounts [51]