On Friday (13 February), NatWest Group (LSE: NWG) turned in what looked to me like cracking set of results — but the share price dipped in morning trading. Stock market sentiment isn’t an easy thing to predict.
CEO Paul Thwaite said: “Income of £16.4bn and a Return on Tangible Equity of 19.2% are significantly up on last year, and ahead of guidance, whilst dividends per share increased by 51% compared to 2024.“
That’s the kind of result I’d have considered unthinkable a couple of years ago. But after the lukewarm market reaction, what might the future hold for NatWest stock?
Steady cash stream
The huge dividend hike means a total for the year of 32.5p per share. And on the previous day’s share price close, that’s a very respectable yield of 5.5%. The bank said it expects “to pay ordinary dividends of around 50% of attributable profit and will consider buybacks as appropriate.“
Talking of share buybacks, there’s already a new one worth £750m lined up for the first half of 2026. And when I see the return on equity NatWest is achieving, I rate the likelihood of shareholders enjoying one very welcome thing are high. And that’s a healthy future stream of cash rewards.
I think back to NatWest — then Bank of Scotland — being 80% state-owned after the banking crash bailout. And now it’s been back in full private ownership for close to a year. Everyone talks about the amazing recovery Rolls-Royce Holdings has pulled off in the past few years. I rate NatWest’s progress right up there with it.
The price is right?
So why did the share price respond so weakly to what looks about the best news investors could hope for? I think it’s largely because they’ve been hoping those hopes for months. Bullish expectations have launched the shares almost into orbit. We’re looking at a 220% rise over the past five years — from something as boring as a FTSE 100 high street bank.
Any disappointment could have led to a big slump. But on the other side, positive results were arguably already built into the share price — and merely confirming it perhaps didn’t seem such a big thing.
So has the share price push lifted the valuation a bit too far? I’m really not sure it has. The 68p in earnings per share just reported gives us a trailing price-to-earnings (P/E) ratio of 8.75. That’s hardly up in the stratosphere, with the FTSE 100 long-term average around 15. Forecasts show the P/E about the same for the current year, dropping to 8.1 in 2027.
Economic outlook
UK growth reached just 0.1% in the final three months of 2025. Being based on our single domestic economy is a serious risk — and the UK financial sector lost a lot of strength after Brexit. Future falling interest rates shouldn’t do much good for potential bank profits either. So some risk is definitely there.
But for passive income potential, I rate NatWest as definitely worth considering at today’s valuation.
