NatWest Group PLC down to Neutral as JP Morgan says little upside left amid
The investment bank said they now estimated the chance of a last minute trade deal between the UK and the EU at around 60%, adding that the big banks also faced an elevated risk of negative interest rates
PLC () has been downgraded to ‘neutral’ from ‘overweight’ by analysts at JP Morgan as they revisited their coverage on the UK’s banks following the Bank Of England’s decision to lift the sector’s ban on dividend payments from next year.
In a note on Friday, the investment bank said the decision to reinstate dividend payments “strikes a sensible balance on moving away from a blanket ban on distributions towards a conservative framework that should lead to c2-3% dividend yield for 2020 across the UK banks”, although they said such a move will also lower the probability of share buybacks, especially from NatWest.
READ: Banks given permission by BoE to restart modest dividend payments
Analysts also said the new conservative dividend framework “essentially rules out” a return of quarterly payments from other major banks PLC () and Holdings PLC ().
JP Morgan added that there could be “more near-term downside” for the banks from a no-deal Brexit, with analyst probability of a last-minute agreement between the UK and EU falling to 60% to 40% in favour.
The bank also said regardless of the Brexit outcome the risk of negative interest rates “remains elevated especially if the economic recovery lags other developed economies, creating an overhang on valuation” and pegged NatWest with a target price of 180p.
Shares in NatWest fell 4.8% to 153.3p in early trading.
Read More: NatWest Group PLC down to Neutral as JP Morgan says little upside left amid