Over the previous 12 months, NatWest (LSE: NWG) has been a wonderful funding for a lot of shareholders. NatWest shares have moved up 91% throughout these 12 months. On prime of that, the FTSE 100 financial institution presents a dividend yield of 4.1% and has grown its extraordinary dividends per share considerably over the previous three years.

Regardless of the large rise in price, NatWest shares proceed to promote for a bit lower than 9 occasions earnings. That appears doubtlessly low-cost to me. So is it value including the financial institution to my portfolio now within the hope of future beneficial properties?

The outlook for banks appears unsure

Stepping again from NatWest particularly, as an investor I really feel the market’s outlook for UK banks should have modified considerably to justify the kind of price motion now we have seen over the previous 12 months.

NatWest’s 91% rise is big. However throughout the identical interval, Lloyds has moved up 45%, Barclays 97% and HSBC 34%. So it appears as if the Metropolis reckons that the outlook for UK banks generally now appears markedly stronger than a 12 months in the past.

That displays the financial system being a bit extra resilient than was feared, financial optimism globally coming in 2025 has been boosted in some areas as proven in sturdy inventory market efficiency and the potential for central banks’ strikes on rates of interest to enhance development charges.

Nonetheless, is that sufficient to justify hovering financial institution share costs? The financial system could also be wobbling lower than feared however it nonetheless feels fairly fragile to me, each on a UK and world perspective. The chance of a slowing financial system additionally brings dangers of upper mortgage defaults, hurting income at banks together with NatWest.

This share may maintain transferring up, however will it?

One other issue particular to NatWest has been the UK authorities promoting down the stake within the financial institution it had held since bailing it out throughout the 2008 monetary disaster. This week, that fell under the 8% degree.

Lowering then eliminating the federal government shareholding may, over time, result in a decrease variety of shares in circulation and so push up earnings per share. That might enhance the share price.

The financial institution’s earnings within the first 9 months of final 12 months confirmed year-on-year development of 4%. With over 19 million clients, sturdy manufacturers and a confirmed enterprise mannequin in an area I count on to maintain seeing excessive demand, I believe the well-known financial institution may maintain doing effectively. That might push NatWest shares up.

Alternatively although, I ponder whether the market has been too fast to dismiss these financial dangers. NatWest’s strengths in the present day have been true a 12 months in the past too. A 91% share price rise feels steep to me in these circumstances.

I believe the worldwide financial system stays weak and swathes of the British financial system are wanting distinctly shaky. I stay involved concerning the threat that poses to banks’ earnings — and their share costs. NatWest, for now at the least, will not be on my inventory market buying listing.