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On Tuesday, JPMorgan analysts increased the price target for Natwest Group PLC (NYSE:NWG:LN) (NYSE: NWG) shares to £5.00, up from £5.90, while sustaining an Overweight rating on the stock. The revised price target reflects confidence in the bank's trajectory toward privatization by mid-2025 and its long-term financial prospects.
Natwest Group's potential post-privatization, referred to as 'The Next (LON:NXT) Act', includes a projected net interest income (NII) growth of over 6% compound annual growth rate (CAGR) through to 2027, assuming average swap rates decrease to 330 basis points. The analysis also suggests that a more stable deposit environment could further bolster NII and contribute to an ongoing cycle of earnings per share (EPS) upgrades.
The bank has significantly derisked its balance sheet since the Global Financial Crisis (GFC), with limited exposure to Motor Finance and opportunities to increase market share with an estimated 3% loan growth CAGR. JPMorgan anticipates a shift in distributions with an ordinary dividend payout policy of 50% from 2026, compared to the 40% consensus, potentially offering a cash yield of 8% per year and an average total yield of approximately 11% per year from 2025 to 2027.
Analysts at JPMorgan find Natwest's valuations attractive, trading at 6.4 times price-to-earnings (PE) for 2026 estimates, which is below the long-term PE average of 9x (two-year forward since 1999, excluding the GFC) and approximately 35% lower than the UK market average. Their EPS forecasts for Natwest are roughly 6% above the consensus for 2025 and 2026.
The upcoming fiscal year results are seen as a positive catalyst that may support JPMorgan's revenue forecasts above consensus. Additionally, medium-term stated return on tangible equity (ROTE) targets are expected to be raised to 16%, compared to the current goal of over 13% for 2026. JPMorgan's own estimate is slightly higher at 16.3% for 2026.
As one of JPMorgan's top picks in the sector, Natwest is trading at 6.4x PE and 1x projected tangible net asset value (PTNAV) for an adjusted ROTE of 17.0% for 2026, indicating a potential 30% upside to JPMorgan's December 2026 price target of 500p.
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