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NatWest’s share price dropped on Thursday, even though the company reported strong quarterly results. The bank, formerly known as Royal Bank of Scotland, saw its shares fall by more than 4% to 195 pence.
In recent weeks, several major banks, including Bank of America, Goldman Sachs, and JP Morgan, have reported impressive earnings. HSBC was the first UK bank to release its results on Tuesday, followed by Lloyds Bank on Wednesday.
A common trend has emerged, as many of these banks have posted significant profits by releasing funds set aside for provisions last year.
NatWest followed this trend, reporting an operating profit of £946 million, which was significantly higher than the £519 million reported the previous year and above the £536 million that analysts had expected.
Despite these strong results, NatWest’s share price declined, partly due to an ongoing money laundering investigation by the Financial Conduct Authority (FCA). The FCA alleges that the bank failed to detect deposits totaling more than £365 million over five years. The case is set to begin on May 26 and could result in a substantial fine.
NatWest is still largely owned by the UK government, which bailed it out during the financial crisis in 2009. However, the bank has recently repurchased some of the government’s shares.
Looking at the daily chart, NatWest’s share price has been on a strong upward trend, increasing by more than 115% from its lowest point in October last year. The stock has formed an ascending channel, as shown in black, and has recently approached the lower boundary of this channel.
It also appears to be attempting to break below the 23.6% Fibonacci retracement level. This suggests that the upward momentum might be starting to weaken. While it’s hard to predict, there’s a possibility that the stock could decline to 180p, the 23.6% Fibonacci retracement level, as the legal case progresses.