NatWest (LSE: NWG) shares have had a brilliant run lately, and they’re not alone. All the big FTSE 100 banks have done well in recent years, including China‑focused HSBC Holdings (LSE: HSBA). Can it continue this year?
Personally, I’m not so sure. The banks have been boosted by higher interest rates, which have helped them widen net interest margins, the difference between what they pay savers and what they charge borrowers. But central bankers have been cutting rates lately, and there are probably more cuts coming our way in 2026.
Similar stock performance
NatWest shares climbed 64% last year and are up a stunning 265% over five years, with dividends on top. The bank enjoyed an extra boost because it’s finally exited taxpayer hands. In its full-year 2024 results, it posted a £6.2bn profit, a 17.5% return on tangible equity (RoTE), and returned £4bn to shareholders via dividends and share buybacks. Nice work.
The HSBC share price climbed 52% last year, slower than NatWest but still very healthy, while its five-year return sits at about 215%. HSBC has also been generous with dividends and buybacks, although it’s pausing the latter for nine months while it looks to buy out minority investors in Hong Kong lender Hang Seng Bank.
HSBC’s exposure to China and Asia is often viewed as a plus, but it also adds another layer of risk, tying results to the region’s economic fortunes. International diversification can cut both ways. NatWest’s greater UK focus brings simplicity and maybe a degree of security, but it limits long-term growth prospects.
Both banks trade on surprisingly similar valuations. NatWest looks decent value with a price-to-earnings ratio of about 12.42, while HSBC sits just above at 12.65. Their price-to-book ratios are close too, with NatWest around 1.22 and HSBC nearer 1.35. They’re not bargains, but neither are dauntingly expensive.
Dividend prospects
Income prospects look solid for both. NatWest’s trailing dividend yield is around 3.27% but forecast to hit 5.28% in 2026, while HSBC’s trailing yield is roughly 4.24% and expected to reach 4.73% this year. Investors aren’t just getting a decent level of income, but one that should rise steadily over time.
After such strong runs, I think both are likely to face a bumpy year ahead. Brokers appear to agree, with consensus one-year price forecast targets for NatWest suggesting the shares could hit 673p. If correct, that’s growth of just 2.35% from here. That looks positively optimistic compared to consensus forecasts for HSBC, which produce a one-year price target of 1,112p, down 6.7% from today.
This supports my suspicion that investors can’t expect the same kind of spectacular growth over the next year or so. I still think they’re both worth considering for a long-term portfolio, but neither bank looks as electrifying as at the start of this rally. They’d look tempting if markets dip but as things stand, investors may find faster recovery opportunities elsewhere on the FTSE 100 today.
