At helabright.com, we believe that making smart investment decisions doesn’t require insider knowledge – just a clear understanding of the facts, trends, and what they mean for your money.

Today, we are exploring the recent performance and future outlook of NatWest Group (NWG.L), one of the UK’s leading banks, to help you decide whether it might be a suitable addition to your investment portfolio in 2025.

In the past year, NatWest shares have skyrocketed by around 70%. That kind of growth is impressive for any stock, especially within the FTSE 100, where many giants tend to crawl along with modest gains.

But, what’s driving this surge? Can this momentum continue in 2025? And, more importantly, what does this mean for you as an everyday investor looking to grow your wealth?

Let’s unpack the story.

NatWest’s Strong Position: Why the Share Price Has Soared

Several factors have powered NatWest’s rise:

1) Strong earnings – NatWest has been posting robust profit figures.

2) A steadily decreasing UK government stake (now below 5% for the first time since the 2008 financial crisis), which has helped boost confidence.

3) Favourable banking environment – higher interest rates and a resilient economy have benefited banks like NatWest.

So, is now a good time to consider investing in NatWest?

Let’s first of all look at NatWest’s fundamentals:

Valuation multiples  

The bank is currently trading at a forward price-to-earnings (P/E) ratio of about 7.5x for 2025. For context, lower P/E ratios often suggest the stock might be undervalued or that growth expectations are modest. 

– By 2026 and 2027, this ratio is expected to decrease further, reaching 6.6x and 6.3x, respectively.

Price-to-book ratio  

Expected to be 1.12x in 2025, slightly decreasing to 0.97x by 2027. This indicates increasing confidence among investors in NatWest’s ability to generate returns above its book value.

Returns

– The bank is projected to deliver a Return on Tangible Equity (RoTE) above 15% through 2027, a healthy figure that suggests the bank is efficiently generating profits from its capital.

Dividends and Shareholder Returns

Dividends

Perhaps most exciting for income-focused investors, NatWest is set to increase its dividend from 21.5p in 2024 to 28p in 2025, offering a forward yield of 6.8% – quite attractive compared to many other stocks and well above the FTSE 100 average. 

The payout ratio (what proportion of earnings is paid out as dividends) is expected to be around 50%, indicating a strong commitment to returning capital to shareholders.

Share buybacks  

Alongside dividends, NatWest has been repurchasing its own shares, reducing the overall share count and boosting earnings per share (EPS).

Why This Matters for Everyday Investors

You don’t need to be a hedge fund manager to see the appeal:

Dividend growth + strong capital returns = steady income + potential long-term growth.

For everyday investors, especially those focused on building passive income or retirement portfolios, NatWest’s rising dividends and consistent buybacks could make it an increasingly attractive income stock.

Moreover, the UK government’s reduced stake removes some political overhang that has weighed on the stock for years. This signals a new chapter: where NatWest can operate more like a fully independent commercial bank.

But, What Are the Risks?

While the outlook appears promising, it’s important to remember that no investment is without risk:

Global economic uncertainty

Trade tensions and economic slowdowns in the US and UK could impact earnings.

Interest rate fluctuations

A sharp decline in interest rates or an increase in defaults could hurt margins.

Valuation limits

The stock is only about 4% below the average analyst price target, suggesting limited room for further appreciation after its recent rapid growth.

This could indicate that while there may still be an upside, the easy gains may already be behind us, at least in the short term.

What Does This Mean for You?

As an everyday investor, it’s important to balance potential rewards with risks.

NatWest’s current valuation indicates some appreciation potential, but probably not a huge leap.

It’s a solid choice if you’re looking for exposure to UK banking and a good dividend yield, especially in a low-interest-rate environment.

Should You Buy, Hold, or Watch?

For everyday investors, NatWest at the moment offers:

Attractive dividends

A solid capital position

Strong earnings momentum

However, with valuation multiples showing only modest room for appreciation, NatWest may now be better suited for long-term holders or those looking for steady income rather than explosive short-term gains.

Key takeaway 

NatWest seems to be a relatively stable, income-generating stock with room for modest growth especially if the UK economy remains resilient, and interest rates stay supportive.

Final Thoughts

Investing is always about aligning your personal financial goals, risk tolerance, and market understanding.

While NatWest shows promise in 2025, diversification remains key.

Don’t put all your eggs in one basket. Consider how stocks like NatWest fit into your broader investment plan.

Stay informed, stay diversified, and most importantly, invest with purpose.

At helabright.com, we aim to empower you with clear, actionable insights.

If this sort of information interests you, check out our blog for more.