Like billionaire investor Warren Buffett, I love to go shopping for stocks that are cheap. And right now, a case can be made that NatWest Group (LSE:NWG) is one of the FTSE 100‘s best value shares.

At least, that’s according to earnings and dividend forecasts for the blue-chip bank.

At 313.5p per share, NatWest shares trade on a forward price-to-earnings (P/E) ratio of 7.4 times. They also carry a dividend yield of 5.3%, based on the City’s predictions for 2024 dividends.

Let’s drill down into these numbers, and consider whether the bank is (or isn’t) the bargain that it appears at first glance.

Attractive value

To assess the company’s value, I’ve compared it to the broader FTSE 100 index, along with other major banking stocks on the London stock market.

On the first measure NatWest’s share price does well. Its prospective P/E ratio of 7.4 times is well below the Footsie average of around 11 times.

Meanwhile, its 5%+ dividend yield for this year surges above the 3.5% index average.

NatWest’s value for money against the wider banking industry is more mixed though.

Its P/E ratio for 2024 is underneath the sector average of 8.5 times. This group includes Lloyds Banking Group, Barclays, HSBC Holdings, Standard Chartered and Banco Santander.

However, its dividend yield of 5.3% undershoots the industry average of 5.9%.

To buy, or not to buy?

All things considered, NatWest shares seem to offer solid value for money. So you may expect me to break out my chequebook and load up on the bank.

This isn’t something I plan to do any time soon. As a long-term investor, I wouldn’t touch the FTSE bank with a bargepole, in fact. It’s my opinion that NatWest’s low valuation reflects its poor growth prospects and high risk profile.

The company’s share price remains 17% lower than it was 10 years ago. The bank faces significant challenges to get anywhere close to these previous levels.

Too risky

Britain’s banks have risen in value on hopes of interest rate cuts starting from the summer. A fall in rates could stimulate revenues and reduce the chances of thumping loan impairments.

However, interest rate reductions are double-edged swords as they also reduce margins.

NatWest’s first-quarter net interest margins (NIMs) are already under significant pressure, reflecting the end of the Bank of England’s rate hiking cycle. These dropped 0.2% from a year earlier, to 2.05%, when mounting competition put added stress on the bank.

UK-focused banks like NatWest and Lloyds also face a difficult time as the British economy splutters. The OECD thinks growth will be just 0.4% and 1% in 2024 and 2025, respectively, with GDP expansion tipped to be the weakest across the G7 next year.

The worry is that this backdrop of poor growth may persist beyond just the short term. The UK faces massive structural problems like labour and skills shortages, high public debt, and rising trade frictions that will take years to soothe. And today there’s no clear path to overcome these obstacles.

As I say, NatWest shares are cheap. But there are plenty of other low-cost FTSE 100 shares I’d rather own right now.