NatWest share price has been in a strong bullish comeback in the past few weeks despite the rising chances of a deep recession in the UK. The NWG stock surged to a high of 265p on Monday, the highest level since September 22. It has risen by over 23% from the lowest level this year.
NatWest is a major domestic UK bank that was formerly known as the Royal Bank of Scotland (RBS). The bank operates several well-known brands, including Coutts, the bank used by the Royal Family. Unlike Barclays, the bank has recoiled from a company with global ambitions to a national retail bank. It has no major investment banking and wealth management operations.
Therefore, NatWest Group’s performance is highly correlated with the performance of the UK economy. In the first nine months of the year, the company said that its operating profit rose by 15% to £4.1 billion. Its Return on Tangible Equity (ROTE) rose to 10% as its net lending to customers grew by 5.4% to £372 billion. Most importantly, the company’s common equity tier 1 ratio dropped to 14.3%.
NatWest is a generous dividend payer. It has already paid over £750 million in dividends and is aiming to pay £1 billion this year. This is in addition to the £1.75 billion special dividend it announced earlier this year. The company has repurchased stock worth over £1.2 billion.
NatWest share price faces a significant challenge going forward. First, while its net interest income is set to soar, the company will likely see higher defaults as the UK goes through a deep recession. Indeed, the company announced an impairment charge of £242 million in the third quarter. Second, its costs have surged in the past few months.
Analysts have a mixed opinion of the NatWest stock price. In November, analysts at the Royal Bank of Canada reiterated their bullish view and set their stock target to 300p. A month earlier, analysts at Deutsche Bank, Barclays, and Berenberg boosted their outlooks to 380p, 400p, and 350p, respectively.
The daily chart shows that the NWG share price has been in a strong bullish trend in the past few weeks. During this time, the stock has jumped above the 200-day and 50-day moving averages and formed a golden cross pattern. It has moved above the ascending trendline shown in green while the Relative Strength Index (RSI) has been in an upward trend.
The stock has formed a rising wedge pattern, which is usually a bearish sign. Therefore, there is a likelihood that the stock will have a bearish breakout in the near term. If this happens, the next key level to watch will be at 247p. A move above the resistance point at 265p will invalidate the bearish view.
This post was last modified on Dec 06, 2022, 06:05 GMT 06:05