Barclays Upgrades NatWest to Overweight With 850p Target on Rates Case

Barclays has upgraded NatWest Group (LON: NWG), the UK high street lender, to Overweight from Equal Weight and raised its price target to 850p from 740p. Overweight is a buy-like rating that expects a stock to outperform; Equal Weight is neutral.

The shares opened higher and closed today at 667.2p, up 2.08% from 653.6p yesterday. That leaves them 8.1% below their 726p high of the 4th of August, and below their 50-day average of 690.1p but above the 200-day average of 634.0p.

The case rests on interest rates. Barclays raised its assumption for where Bank Rate peaks by 50 basis points to 4.25%, which lifts 2028 earnings per share by about 5%. That rises to as much as 10% over time as the structural hedge matures, meaning the fixed-rate swaps that lock in income.

Barclays also raised its earnings per share forecasts by up to 7% across 2026 to 2028, mainly on stronger revenue.

It sees offsets. Competition for deposits partly weighs on the outlook, but Barclays does not expect a repeat of the sharp adverse shift in deposit mix seen in 2023, and thinks households may be nearing the limit of moving savings into costlier term deposits. According to Investing.com, it also treats bank tax rises ahead of the Budget as a manageable near-term risk that is largely reflected in the valuation.

Barclays says Evelyn, the wealth business NatWest has acquired, is progressing well, with scope to sell banking products to its clients and to exceed expected revenue synergies.

On our calculation, 850p implies upside of 182.8p, or 27.4%, from today’s close; the old 740p target implied 10.9%. That is well above the Street. MarketBeat’s consensus target was 769.38p across eight brokerages, rated “Moderate Buy”, as of the 30th of September, and Goldman Sachs reportedly holds a Hold rating with a 790p target.

The next test is third-quarter results on the 30th of October, with the Budget and its bank-tax risk still to come.