Source: Sharecast
Berenberg stated Natwest's results included one fault, noting the bank's guidance for a FY26 return on tangible equity greater than 13% was unchanged, despite a "significantly stronger" starting point for revenues and improved prospects for margins and growth.
"We regard a 14% RoTE as a realistic floor," said Berenberg. "These returns can be complemented by superior growth and capital returns versus key peers, in our view. Partly as a result, we believe that NatWest can comfortably justify a 25% premium to total book value per share (which can grow by circa 12% annually) versus a current valuation of c1.1x TBVps."
The German bank also believe that further market share gains will be likely for the bank, particularly in UK mortgages and commercial banking, and believes NatWest to be well positioned to benefit from improving prospects for UK lending growth.
"We expect circa 3.5% organic annual loan growth during the next three years. Announced acquisitions provide a further circa 1.2% benefit," said Berenberg, which reiterated its 'buy' rating on the stock.
Jefferies has hiked its target price for power station operator Drax by 25% after a "confident" presentation from the firm in last week's interim results gave the market increased visibility over the future outlook.
"Drax presented a confident 1H24 update, bolstered by a new share buy back programme and dividend increase that has been taken very positively by the market," Jefferies said in a research report on Monday.
The broker has kept its 'buy' rating and lifted its target price from 600.0p to 750.0p after upgrading underlying earnings forecasts for 2024 2028 by 4% on average.
Drax said that strong net zero ambitions of the new Labour government are positive for bioenergy with carbon capture and storage (or BECCS), while BECCS could see a surge in demand from powering AI data centres
Jefferies added that the stock currently trades at an enterprise value-to-EBITDA ratio of just 3.4 – a 20% discount to its three-year average.
Wage inflation and easier comparatives with last year could lead to a pick-up in demand for UK retailers this autumn, according to RBC Capital Markets, which highlighted M&S and Currys as its top stock picks. The stocks, both rated 'outperform', were currently on the broker's "best ideas list".
"Easier seasonal comps, above inflation public sector pay awards, relative political stability and falling interest rates. These are all reasons to believe that retail demand should pick up this Autumn," RBC said in a research report on Monday.
The broker said that M&S, along with sector peers, offers "leverage" to a potential improvement in demand for apparel later in the year.
Meanwhile, it also noted that demand for electricals had improved recently and should favour Currys despite ongoing struggles in the Nordic market.
