After returning 101% in 2024 is this FTSE bank the best stock to buy in 2025?

The results are in and they have done very well this year FTSE 100 The stock is a high street giant NatWest Group (LSE: NWG).

Its shares are up 88% year to date in 2024 and if dividends are included, the total return is 101%.

Sadly, I chose to gain my exposure to the banking sector through Lloyds Banking Groupand for a while, I did well too. Lloyds was then rocked by the car mis-selling scandal, while NatWest continued.

Susannah Streeter e Hargreaves Lansdownecompiled the information, said that as the year draws to a close, NatWest’s share price continues to rise “on a roll, third quarter trading expectations”.

NatWest shares are up half a century this year

He added: “Default rates remain at stable and low levels, and despite the pessimism surrounding the UK Budget, the improvement in UK growth prospects for 2025 bodes well for banks’ sensitivity to the wider economy.”

Personally, I am more concerned about the UK’s growth prospects. Especially after this morning’s Office for National Statistics, which showed the UK economy contracted by 0.1% in October, in line with a 0.1% contraction.

Streeter said NatWest’s revenue guidance had been rising with interest rates expected to remain high for some time. “That builds on improved core performance as it keeps revenue strong.”

Higher interest rates should support NatWest’s net interest margins, the difference between what it pays out and what it charges borrowers. There is a risk that it will increase the deterioration of residential housing, however, as repairs take longer and homeowners are forced to pay back the money at higher rates. The two-year correction has returned more than 5%.

Streeter says NatWest did “continued progress in keeping costs under control” and again “a major beneficiary of its large structural fence”designed to accelerate overall interest income.

He said: “The way the fence is designed means that it will grow to a better level in the coming years from some of the lower prices in this sector, it will be another sector that you can enjoy.”

I love the trend of the good sector and I hope it will sweep my share of Lloyds, too. But should I save some cash and go to NatWest?

Could this FTSE 100 stock double as well?

I’m emotionally wary of buying a stock after a blockbuster hit. My concern​​​​​​​​​​ is that I pay too much and end up losing quickly. NatWest shares don’t really look expensive, trading at 8.47 times 2024 earnings. However, low P/Es are the norm for all major banks, so I’m not sure how much I can trust them.

A price-to-book ratio may be a better guide. Last year most FTSE 100 banks had a P/B of around 0.4 or 0.5 times. Today, NatWest is up to 0.97. That is far from the figure of 1 that is seen as the ideal value.

The 18 analysts providing one-year share price forecasts have produced an average target of 463.3p. If so, that would be a 14.07% increase from today (not 88% sadly). Combined with a weather yield of 5.08% that suggests a potential total return of around 20%.

But I won’t be buying NatWest. We had our fun. Instead, I’ll hold on to my Lloyds shares, and hopefully lose them in 2025.