I’m always a little wary when a company changes its name. Still, I can understand NatWest Group (LSE: NWG) wanting to put the old Royal Bank of Scotland days behind it. And if the NatWest share price is anything to go by, the change is paying off.
Since a low in September 2020, NatWest shares have recovered a bit more strongly than Barclays. And they’ve easily outperformed Lloyds Banking Group. In fact, since 21 September, the NatWest share price has gained 90%. That’s a cracking result for anyone who managed to time it right.
But it only paints a small part of the picture. Over the past 12 months, NatWest has dropped 14%. And over five years, we’re looking at a 28% share price fall. On top of that, the dividend had only just started coming back after the bank’s earlier travails. And then it was halted last year at the onset of the Covid-19 pandemic. That didn’t help the NatWest share price either.
But there must be an end to the pessimism somewhere, and an attractive time to buy. Mustn’t there? Well, there’s a bit of positive news in Friday’s full-year results. The dividend is back. The 3p per share final dividend amounts to a modest yield of 1.7%. But NatWest also included plans to pay out around 40% of profits as an ordinary dividend. Those profits aren’t here yet, mind.
A big 2020 loss
For the year to December 2020, NatWest recorded an operating loss of £351m. Impairment provisions rose too, by £1.4bn compared with 2019 to £6.2bn. So when the bank says it hopes to pay at least £800m in ordinary and special dividends over the 2021–23 period, I’m going to try to contain my excitement. I’ll wait and see.
Still, the market did react positively. Despite a brief dip in morning trading, at the time of writing the NatWest share price is up 3.5% on the day. That’s better than Barclays, up 2.8%, and Lloyds, up 1.3%. Lloyds is the last of these big three to reveal its 2020 figures, with results due on 24 February, after Barclays reported on Thursday. But as things stand today, would I buy NatWest shares?
Well, some of the uncertainty surrounding the financial sector has been at least partially cleared. The possibility of a no-deal Brexit was surely holding banking shares back, along with the rest of the stock market. But even though we have a deal, the visibility is still not exactly crystal. Trade in services, including banking, is still far from clarified. And though we’re enjoying considerable Covid-19 vaccine success, these new variants do keep popping up.
NatWest share price support?
I think it’s important not to lose sight of our economic outlook. We might be over the worst of the pandemic downturn. But we could still be in for a good few years of weakness. Still, liquidity figures at NatWest look decent, and I think that should help support the NatWest share price.
I’m cautiously optimistic regarding banking in general, and NatWest specifically. But I already own Lloyds shares, and one bank is enough for me in the current risky financial climate. I’ll keep watching.
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Alan Oscroft owns shares of Lloyds Banking Group. The Motley Fool UK has recommended Barclays and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.