NatWest gets positive reaction after rejected Santander bid
Last updated: 08:00 13 May 2025 EDT, First published: 07:59 13 May 2025 EDT
UBS maintained its positive view on NatWest Group PLC (LSE:NWG) after a report that its £11 billion offer for Santander UK's retail business earlier this year was rejected.
The Financial Times reported on Friday that NatWest's proposal was rejected by the Spanish lender, which has since raised €7 billion through a stake sale in its Polish unit, making a future transaction involving the UK business less likely.
UBS highlighted that the proposed offer would have valued Santander UK's retail division at 12.6 times its estimated 2024 net income and 1.2 times tangible net asset value (TNAV). It also noted the deal’s potential impacts on capital and earnings for both parties.
For NatWest, Santander UK Retail & Business Bank would be a "large purchase", with last year's income and pre-provision profit around a quarter of that of NWG on 43% / 35% of its loans and deposits. "It's about 80% of the size of NatWest's equivalent division and appears to be a lower interest margin operation, driven mostly by balance sheet structure given similar disclosed loan (~4%) and deposit (~2%) yields."
UBS said it maintains its positive view on NatWest, citing its valuation of 7.7 times forecast 2026 earnings and 1.4 times TNAV for a projected 17% return on tangible equity.
Its 'buy' rating on NatWest comes with a 12-month price target of 540p, suggesting a potential upside of 9.98% from the current price of 491p
