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NatWest’s share price has lost most of the gains it made earlier this year due to growing concerns about the UK economy. The stock has dropped by more than 10% this year and over 18% from its highest point in 2022. Other major UK banks like Lloyds, Barclays, and Standard Chartered have also seen significant declines this year.
NatWest, formerly known as Royal Bank of Scotland, is one of the largest banks in the UK. It operates under several brands, including NatWest, Royal Bank of Scotland, Ulster Bank, Coutts, Drummonds, Lombard, Isle of Man Bank, and RBS International.
The bank runs various segments, including retail banking, private banking, commercial banking, and NatWest Markets. Most of its revenue comes from business and consumer lending. Unlike Barclays and HSBC, NatWest is primarily a domestic bank with no significant international operations.
This year has been mixed for NatWest. On one hand, the higher interest rates in the UK have boosted the bank’s revenue and profits. In the first half of the year, NatWest’s operating profit before tax increased to over £2.83 billion, up from £2.5 billion in the previous period.
The bank’s attributable profit rose to £1.8 billion, and its Return on Tangible Equity (ROTE) improved to 13.1%. NatWest also maintains one of the strongest balance sheets in the UK, with a CET1 Capital Ratio of 14.3%. This ratio is the fourth highest in Europe, behind Unicredit, Lloyds, and ABN Amro.
However, concerns remain about the UK’s economic outlook as inflation rises and the British pound weakens. The housing market has also slowed significantly in recent months due to a sharp increase in mortgage rates.
Attention is now turning to NatWest’s Q3 earnings, set to be released next week. These results are expected to show higher interest income alongside slightly increased loss provisions.
Despite these challenges, NatWest could be seen as an attractive investment due to its low valuation, increased share buybacks and dividends, and rising interest income. The bank is actively repurchasing a significant amount of its stock, with analysts predicting that it could buy back 20% of its market cap by year-end.
Looking at the daily chart, NatWest’s share price has been in a downtrend over the past few months, breaking below key support levels at 251p and 277p. The stock has fallen below all its moving averages, although the Relative Strength Index (RSI) has moved above the oversold level.
Given this trend, NatWest’s share price is likely to continue declining ahead of its earnings report. If this happens, the stock could test the support level at 200p. However, a move above the 240p resistance level would challenge this bearish outlook.