£2,000 invested in the best-performing FTSE 100 stock a year back is currently worth…

Heading into 2025, some investors will have noted the strong performance of NatWest Group (LSE:NWG). When including dividends, it turned out to be the highest total return stock in the entire FTSE 100 for 2024.

Based on momentum, some might have thought it was a good idea to buy Â£2k worth of the FTSE 100 stock. A year down the line, here’s how it would have panned out.

Continued momentum

Over the past 12 months, NatWest shares have rallied a further 61%. So the Â£2,000 investment would currently be worth Â£3,220. This is quite a handsome return, especially when you consider it’s almost triple that of the broader index. The move to put money in the hot growth stock at the start of the year certainly was rewarded.

In the course of the year, the bank delivered robust earnings growth with several quarters beating expectations. The latest trading update from October showed income jumped 16% versus the same period last year. Its CEO commented that the outperformance was âunderpinned by healthy levels of customer activity”.

Another factor that has helped the share price is a repricing of expectations regarding interest rates here in the UK. If we rewind a year, some were expecting interest rates to fall sharply. Yet in reality, we haven’t seen as many cuts in 2025 as planned, partly because inflation has remained sticky. This has been good news for NatWest, as it means the net interest margin has remained very healthy.

The outlook for 2026

For those who didn’t buy the growth stock last year, the question is whether it can deliver a third straight year of bumper share price gains.

I expect more pressure to come on the net interest margin, given the view of further multiple cuts in the UK. Of course, this view proved wrong in 2025, but I think the UK economy is in a weaker position than last year, so the Bank of England committee will need to take steps to help boost GDP.

As interest rates fall, NatWest stock could benefit from increased interest from income investors. The current dividend yield of 3.87% is above the index average. With the normal dividend (excluding special payments) having risen for five straight years, I think the trend could continue. Therefore, the share price could rise as people hunt around for ways to earn a higher yield on their money.

Finally, even with the strong rally, the price-to-earnings ratio sits at 12.30. The FTSE 100 average is 18.2, so at a relative level, the stock could still be seen as undervalued. This could help prevent it from seeing any serious crashes, as value investors will rush in to buy the dip.

Overall, buying NatWest shares a year back would have paid off very well. Looking ahead, risks have risen, but I still believe it can continue to appreciate, making it a stock for investors to consider.

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Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.