NatWest share price erased most of the gains it made earlier this year amid rising concerns about the health of the UK economy. The NWG stock has pulled back by more than 10% this year and by over 18% from the highest level in 2022. Other UK bank stocks like Lloyds Bank, Barclays, and Standard Chartered have all crashed this year.
NatWest earnings ahead
NatWest, formerly known as Royal Bank of Scotland, is one of the biggest bank in the UK. The firm operates through several brands like NatWest, Royal Bank of Scotland, Ulster Bank, Coutts, Drummonds, Lombard, Isle of Man Bank, and RBS International among others.
NatWest operates through several segments, including retail banking, private banking, commercial banking, and NatWest Markets among others. It makes most of its money through business and consumer lending. Unlike Barclays and HSBC, NatWest is primarily a British bank with no major operations abroad.
NatWest has had a mixed year. On the one hand, high interest rates in the UK has led to more revenue and profits for the company. In the first half of the year, the company’s operating profit before tax rose to over 2.83 billion pounds. That was a bigger increase than the previous 2.5 billion pounds.
Its attributable profit rose to 1.8 billion pounds while is Return on Tangible Equity (ROTE) rose to 13.1%. NatWest also has one of the best balance sheets in the UK since it has a CET1 Capital Ratio of 14.3%.. This ratio ranks as fourth in Europe after Unicredit, Lloyds Bank, and ABN Amro Bank.
Is NatWest a good buy?
On the other hand, there are lingering concerns about the country’s economy as inflation rises and the British pound stalls. Activity in the housing sector has seen a significant decline in the past few months. This is after mortgage rates jumped to the highest point in years.
Focus now shifts to the company’s Q3 earnings that are scheduled for next week. These results will likely show higher interest income and slightly higher loss provisions.
NatWest seems like a good investment because of its low valuation, higher share buyback and dividends, and higher interest income. On buybacks, the company is buying back a substantial amount of stocks. Analysts expect that the bank will buy 20% of the market cap by the end of the year.
NatWest share price forecast
The daily chart shows that the NWG share price has been in a bearish trend in the past few months. The stock managed to move below the important support at 251p and 277p. It has crashed below all moving averages while the Relative Strength Index (RSI) moved above the oversold level.
Therefore, the NatWest share price will likely continue falling ahead of the company’s earnings. If this happens, the stock will likely test the support at 200p. A move above the resistance at 240p will invalidate the bearish view.