This yr has been a wonderful one for shareholders of NatWest (LSE: NWG), the UK banking large. NatWest shares have soared 82% thus far in 2024.

On high of that they provide a 4.4% yield at at the moment’s price. Which means that, if an investor had purchased the inventory at first of the yr earlier than that 82% price enhance, their dividend yield would at the moment be shut to eight%.

But regardless of a storming 2024, the share nonetheless seems to be low cost on some measurements.

For instance, the price-to-earnings ratio is lower than 8.

In the meantime, the price-to-book ratio (a standard valuation method for banks) can be properly under 1, suggesting the shares might nonetheless provide good worth.

So, what’s going on – and will the inventory actually provide traders good worth even now?

Nice yr for banks

NatWest has had an outstanding yr on the inventory market. However it isn’t alone amongst banking friends in that regard.

Two of the opposite strongest performers within the FTSE 100 this yr have been Barclays (up 70% thus far this yr) and London-based rising markets-focused financial institution Customary Chartered (49% increased now than at first of the yr).

So, whereas NatWest has been the cream of the crop on the subject of share price enhance, clearly the Metropolis has taken a shine to banking shares this yr.

That displays a stronger sense because the yr has gone on that the worldwide economic system is in truthful form and will keep that manner, or get higher. That usually means much less danger of mortgage defaults, which is sweet for financial institution earnings.

I’m not satisfied banks may have a fantastic 2025

However whereas that has been the sentiment, how precisely does it replicate what we’ve seen on this geopolitically risky yr, not to mention what may occur in 2025 and past?

NatWest for instance, I’m not satisfied its firm efficiency this yr has been stellar.

To date we all know the way it did within the first 9 months. Complete revenue fell 3%. Working bills inched upwards. Revenue from persevering with operations was 0.3% decrease than within the prior yr interval.

The corporate’s post-tax revenue within the interval grew – however that largely displays decrease tax expenses than within the prior yr interval.

I don’t assume that could be a dangerous efficiency. However it’s pretty unremarkable for my part. It means that the corporate is already struggling to seek out progress drivers in a sluggish economic system. If the economic system worsens in 2025, defaults might rise and earnings fall. I see that as a sizeable danger for banks together with NatWest.

The valuation doesn’t look costly – for now

Nonetheless, whereas pre-tax earnings from persevering with operations kind of stagnated within the first 9 months, they nonetheless got here in at £1.2bn. That isn’t to be sneezed at.

With a robust model, giant buyer base and confirmed enterprise mannequin, the present valuation for the shares doesn’t look overblown to me – so long as the economic system doesn’t get markedly worse.

I see the economic system as a danger although. If it bites badly into earnings, at the moment’s valuation might come to look a lot much less enticing.

So, for now, I’ve no plans to purchase any NatWest shares for my portfolio.