It’s been looking like NatWest (LSE: NWG) shares has run out of steam. That would hardly be a surprise, given how they’ve been racing along lately. The FTSE 100 banking stock is up an eye-popping 210% in five years, and 40% in the last 12 months, with dividends on top. Has it finally hit the buffers?
The shares are down almost 7% in the last month, as investors fret over the recent £2.7bn purchase of wealth manager Evelyn Partners, which it snapped up ahead of marauding Barclays. They fear NatWest CEO Paul Thwaite overpaid. The market’s response to last week’s full-year 2025 results (13 February) was also pretty downbeat. NatWest gave us plenty of whizzes and bangs, but not the full fireworks show. Yet I’m wondering if there’s one thing they’ve missed in all the noise.
Top FTSE 100 growth stock
When expectations are this high, even solid results disappoint. Typically, I’d expect a company that posted a 24.4% increase in pre-tax operating profits to £7.7bn, beating its own forecast of £7.5bn, to fly to the moon. Especially if it promised investors a £750m share buyback for the first half of its new financial year.
But markets were still biting their nails over Evelyn Partners, while some question the size of Thwaite’s £6.6bn pay packet, up 33%. The shadow of controversial RBS boss Fred Goodwin still hangs over the bank. He got £7.7m in 2006.
Net interest margins nudged up 21 basis points to 2.34%. That’s fine, but investors fear that will reverse as interest rates fall this year. It’s a threat across the banking sector, as it will narrow the gap between what they can pay savers and charge borrowers, which is a real money maker. This partly explains the Evelyn purchase, as Thwaite looks to find a new line of revenue in wealth management. Even though it already has private bank Coutts.
Dividends and buybacks too
There’s another reason investors are treading carefully. As the shares have soared, the trailing yield plunged towards 3%. But with the new results factored in, that’s climbed to 5.35%. NatWest is forecast to yield 5.86% across 2026, then 6.45% in 2027. Which looks a pretty solid rate of income to me, plus buybacks too.
The price-to-earnings ratio was climbing towards 15 but after last week’s results it’s dropped to just 8.5. That looks cracking value to me. It’s true that NatWest must work harder if interest rates continue to fall and the Evelyn bolt-on remains a concern. NatWest is primarily focused on the UK, which is in a sticky position economically. So growth may ease up.
Despite that, I’m keen. In fact, the only reason I won’t personally buy NatWest today is that I have a big stake Lloyds Banking Group, which has a similar domestic focus. Instead, I’ll target Barclays for its international reach. NatWest isn’t quite in screaming buy territory, I feel, but with a long-term view I see it as well worth considering today. The recent dip looks like an opportunity to get in at a decent valuation, and bag a higher yield too.
