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NatWest’s share price has been caught in the recent sell-off of UK bank stocks. The NWG stock price dropped to a low of 245p, its lowest level since July 28, marking a decline of over 13% from its August high. This downturn is in line with other bank stocks like Lloyds, Barclays, and HSBC, which have also seen recent pullbacks.
NatWest, previously known as the Royal Bank of Scotland, is a major UK bank with over 19 million customers. It owns several prominent brands, including Coutts, known for serving the British royal family, Ulster Bank, Drummonds, Lombard, and Isle of Man Bank. The UK government, its largest shareholder, has begun selling its stake and plans to fully divest in the coming years.
NatWest’s business has been performing well, bolstered by rising interest rates. In the first half of the year, the company reported an operating profit before tax of £2.83 billion, with income growth of 16.2%. The bank also allocated £1.75 billion for a special dividend.
Looking ahead, NatWest stands to benefit from further interest rate hikes as UK inflation is expected to surge. Analysts predict that inflation could reach 13% in October, with Goldman Sachs warning it might peak at 22% due to rising energy prices. This situation suggests that the Bank of England may need to increase interest rates significantly in the coming months.
However, soaring inflation could negatively impact NatWest by increasing its costs, such as higher wages and energy expenses. Additionally, the bank could face challenges due to the weakening British pound.
On the technical side, the four-hour chart shows that NatWest’s share price experienced a sharp decline after the firm was fined by the CMA for requiring businesses to open fee-bearing accounts. As the stock fell, it broke below the crucial support level of 251.30p, which was the high on June 6. The 25-day and 50-day moving averages have made a bearish crossover, and the MACD has fallen below the neutral line. As a result, the shares are likely to see further declines, with sellers potentially targeting the next key support level at 226p. A move above the resistance at 251p would invalidate this bearish outlook.