Up 105% year over year! Is this FTSE mobile bank the perfect choice for my Stocks and Shares ISA?

I am looking to top up my Stocks and Shares ISA once NatWest Group‘s (LSE: NWG) is going to the top of my shopping list.

NatWest’s share price has more than doubled in the past 12 months, rising 105.19%. On the other side of the FTSE 100only Rolls-Royce it has performed better in the past, up 149.11%. However NatWest did not attract the same attention.

The euphoria started back in February, when it posted a 22% jump in 2023 pre-tax profits to £6.2bn. That lit a fire under rival banks, as investors decided almost overnight that they should be re-rated.

Can he repeat his stellar year?

Barclays changed to 78.6% compared to last year Lloyds Banking Group it continued until it fell into the disgrace of bad sales in cars. Over 12 months, Lloyds is up 29.19%. Naturally, that’s the one I have. 🙁

One of the reasons for NatWest’s jump in February was that markets overestimated the threat of customer defaults, as homeowners resisted higher inflation and interest rates. With inflation reaching 1.7% in September and interest rates expected to decline further, impairments continued to decline in fiscal year 2024.

Another shadow hanging over NatWest was the prospect of a ‘Tell Sid’-style share sale campaign, with former Tory chancellor Jeremy Hunt making plans to sell the government’s remaining 19.97% stake in the bank at a discounted price. Labour’s Rachel Reeves quickly dismissed that, raising the stakes.

NatWest is strong despite posting a 15.6% drop in first-half profits to £3.03bn on 26 July. Markets decided to look on the bright side after the board increased the interim dividend payment by 9%. The forecast yield is now 4.79%, rising to 5.13% by 2025.

That will look very attractive as falling interest rates drag down cash and bond yields. The downside of low rates is that they may also squeeze interest margins, the difference between what banks are paid for savings and what they charge borrowers. The process has already started. NatWest’s first-half margin fell 16 basis points to 2.07%, although it rose slightly in Q2 to 2.1%.

There may be better value in the FTSE 100

The obvious risk of buying NatWest is that it will struggle to match recent growth, or pull back as investors bank on profits. It doesn’t look overpriced, with a price-to-earnings ratio of 7.83. However, central banks have looked insignificant for years on that scale. That said, the price-to-book ratio of 0.81 isn’t scary at all.

Much now depends on whether interest rates stimulate the housing market and boost the UK economy. The Accountability Office’s forecasts, prepared for the budget, make it clear that the UK is not yet going rogue.

The 18 analysts providing one-year share price forecasts for NatWest have set an average target of 429.8p. If correct, that would mark an increase of 11.6% from today’s price. This confirms my suspicions that next year will not be as good as last year. In fact, how could it be?

I prefer to buy stocks before they perform well, rather than later (not easy, of course). For those reasons alone, I will light the fire at NatWest and hunt the Stock and Shares ISA as my first choice elsewhere.