Lloyds‘ (LSE: LLOY) shares have had a brilliant run, and the same goes for banking sector rival NatWest Group (LSE: NWG). Then came war in Iran. Now they’re down roughly 10% and 15% respectively over the last month. Both FTSE 100 stocks are notably cheaper as a result. Is this a brilliant opportunity to think about buying them?
Lloyds and NatWest are primarily focused on the domestic UK economy. That sets them apart from Barclays and HSBC, which have global reach. This makes them a little riskier, but potentially more rewarding.
The Middle East conflict is shaking every region as oil & gas prices rocket. The UK looks especially vulnerable, given our reliance on imported energy and persistently sticky inflation. While the Bank of England held interest rates, markets are now pricing in two or three rises across 2026. That could help Lloyds and NatWest in one respect, by allowing them to widen net interest margins again. But it could also hammer the mortgage business, and trigger a sharp rise in business and retail customer loan impairments.
FTSE 100 sector reversal
Despite the recent dip, long-term Lloyds and NatWest investors should still feel content. Their shares are up around 30% and 15% over 12 months, and 125% and 155% over five years. Dividends are on top. Stock market volatility is the price investors pay for the superior long-term returns from equities.
A month ago, both looked a bit pricey, with their price-to-earnings ratios climbing above 15. Today, Lloyds trades on a P/E of roughly 9.5 times earnings, while NatWest is down to 7.8.
That’s not just down to recent share price dips. Both banks recently posted big increases in earnings per share, reflecting a bumper 2025. At Lloyds, full-year profits climbed 12% to £6.7bn, while NatWest’s jumped 24.4% to £7.7bn. Both beat forecasts. Rising earnings and falling share prices – isn’t that the ideal time to swoop?
Lower stock valuations, higher dividend yields
Of course there’s a geopolitical hitch. Headlines are screaming about the biggest oil price spike in history. There’s talk of surging inflation, soaring petrol prices and even food disruption. If even part of that plays out, markets could fall much further. Lloyds and NatWest shares would duly follow. That may arguably create an even better buying opportunity, with a long-term view. The kind that only comes along once a decade, for investors brave enough to take it.
Their dividend yields would automatically rise too. Lloyds has a trailing yield of 3.9%, while NatWest yields 6.1%. Those could climb higher if the stocks fall further. Unless, of course, the downturn’s severe enough to force dividend cuts. That risk can’t be ruled out.
Both shares look attractive on a long-term view, but the short term is deeply uncertain. It always is, but this is more extreme than usual. Then again, a full-blown market crash isn’t guaranteed. The FTSE 100 even showed signs of stabilising on Friday (20 March).
Trying to time the very bottom of the market is impossible. Personally, I think the best approach is to drip-feed money in, while keeping some cash in reserve, in case markets fall further. Lloyds and NatWest aren’t the only FTSE shares worth considering right now.
