The outcomes are in and this 12 months’s greatest performing FTSE 100 inventory is excessive road large NatWest Group (LSE: NWG).

Its shares have climbed 88% to this point in 2024 and as soon as dividends are included, the full return is a superb 101%.

Sadly, I selected to realize my publicity to the banking sector through Lloyds Banking Group, and for some time, I used to be doing properly too. Then Lloyds was sideswiped by the motor finance mis-selling scandal, whereas NatWest powered on.

Susannah Streeter at Hargreaves Lansdown, which compiled the info, mentioned because the 12 months attracts to a detailed the NatWest share price remains to be “on a roll, with third-quarter trading beating expectations”.

NatWest shares are one in 100 this 12 months

She added: “Default rates remained at stable and low levels, and despite pessimism surrounding the UK Budget, an upgrade in the UK’s growth prospects for 2025 bodes well for banks sensitive to the broader economic temperature.”

Personally, I’m extra involved about UK development prospects. Particularly after this morning’s Workplace for Nationwide Statistics knowledge, which confirmed the UK financial system shrinking by 0.1% in October, matching September’s 0.1% drop.

Streeter mentioned NatWest’s revenue steerage has been coming in greater with rates of interest anticipated to remain greater for longer. “That’s building in improved underlying performance as it keeps net income margins more robust.”

Increased rates of interest ought to help NatWest’s web curiosity margins, the distinction between what it pays savers and expenses debtors. There’s a hazard it’s going to enhance mortgage impairments, although, as long-term fixes and owners are compelled to remortgage at greater charges. Two-year fixes are again above 5%.

Streeter says NatWest has made “continued progress in keeping costs under control” and can also be “a big beneficiary of its large structural hedge”, designed to clean out web curiosity revenue.

She mentioned: “The way the hedge has been designed means it’s going to be rolling onto better rates in the coming years from some of the lowest rates in the sector, it’ll be another sector tailwind to enjoy.”

I do love a optimistic sector development and hopes it sweeps my Lloyds shares alongside, too. However ought to I scrape collectively some money and diversify into NatWest?

Can this FTSE 100 inventory outperform twice?

I’m instinctively cautious of shopping for a inventory after it’s had a blockbuster run. My fear is I overpay and finish up struggling a direct loss. NatWest shares don’t precisely look costly, buying and selling at 8.47 instances 2024 earnings. Nevertheless, low P/Es are routine throughout the large banks, so I’m unsure how a lot I can depend on it.

The price-to-book ratio could also be a greater information. A 12 months in the past most FTSE 100 banks had a P/B of round 0.4 or 0.5 instances. At this time, NatWest is up to 0.97. That’s solely a whisker away from the determine of 1 that’s seen as honest worth.

The 18 analysts providing one-year share price forecasts have produced a median goal of 463.3p. If appropriate, that might be a rise of 14.07% from at present (not 88% sadly). Mixed with a forecast yield of 5.08% that implies a possible complete return of practically 20%.

However I gained’t purchase NatWest although. We’ve had our enjoyable. As a substitute, I’ll maintain onto my Lloyds shares, and hope they make up misplaced floor in 2025