Some 15 years ago, NatWest (LSE:NWG) shares were trading around 508p. That means investors have experienced a 2% decline during the period. In other words, £10,000 invested then would be worth just £9,800 today.
Of course, there are dividends to account for, but Royal Bank of Scotland (as it was then) didn’t pay a dividend to ordinary shareholders for nearly a decade after the 2008 Financial Crisis. The first dividend to ordinary shareholders since 2008 was paid in October 2018. My calculations suggest that the total dividend received over the 15 years would likely be less than £2,000.
What’s changed?
NatWest’s recent outperformance can be attributed to a few things. First among them is a lower base following the pandemic, and several crises of confidence in the economy and the global banking sector.
However broadly, we can see that after the pandemic the UK economy stabilised, and the banking sector as a whole benefited from increased confidence, higher interest rates, and improved profitability.
Another important factor has been the UK government’s ongoing reduction of its ownership in NatWest. After the 2008 financial crisis, the government became the majority shareholder as part of the bank’s bailout. Over the past few years however, the government has steadily sold off its shares, returning NatWest to private ownership.
This process has removed a significant overhang on the stock as investors were previously concerned about the impact of future government sales on the share price. With the government now holding only a small stake, confidence has returned, and the bank has been able to focus more on shareholder returns, including regular dividends and plans for share buybacks.
So while all UK banks have benefitted from an improving macroeconomic backdrop, NatWest shares had another catalyst: the government sell-off.
Still worth investing in?
So should investors consider investing in NatWest? Well, there are some positive signs. Looking at earnings per share (EPS), analysts expect modest growth from 2025 to 2027. EPS is forecast at about 56p in 2025, rising to roughly 63p in 2026 and 67p in 2027. This indicates steady earnings growth over the period.
The price-to-earnings (P/E) ratio also reflects the improving fortunes. For 2025, NatWest trades at around 7.5 times earnings, falling to 6.6 times in 2026 and 6.3 times in 2027. These multiples are below the long-term average for UK banks and suggest the shares aren’t expensive relative to expected profits.
Dividends are a key attraction. The payout’s set to rise, with management targeting a 50% payout ratio from 2025. Forecasts suggest a dividend of 28p per share in 2025, which translates to a forward yield of about 6.8%.
As such, NatWest offers reasonable EPS growth, a low P/E, and a rising, well-covered dividend. It’s certainly worthy of consideration for investors seeking value and income.
However, I do feel that there may be better value to consider elsewhere on the market. I’m also a little wary of the long-term impact of the Trump tariffs on the global economy and, by extension, banks.
