Is this what the NatWest share price needs to finally get moving?

The NatWest share price has barely moved in the past couple of years, and it’s still way below pre-crisis levels. Is it time to buy now?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

When it comes to NatWest (LSE: NWG), it’s going to take more than just changes its name from Royal Bank of Scotland to get it back to anything like its former glory. Still, the NatWest share price has been doing better than Lloyds Banking Group, being up 3% over the past five years compared to Lloyds’ 16% loss.

And Thursday’s news brings closer a key step on the bank’s road back to full respectability. NatWest is still heavily government-owned, with the taxpayers’ stake amounting to 54.7% of its total market cap. A lot of investors will not feel happy until that drops, ideally to zero.

Granted, the government has not been interfering in the running of the bank, which is a good thing. But I certainly don’t want the potential for government (this one or a future one) to assert control. Now, the long-awaited return of the bank to private hands is set to move a little closer.

The government plans to sell off more of its NatWest shares starting 12 August. It claims that “shares will only be sold at a price that represents value for money for taxpayers,” but I don’t see how there can be anything meaningful behind those words. The bailout at the height of the financial crisis priced the shares, then RBS, at 502p. At the time of writing, the NatWest share price is down at 196p. Value for taxpayers? Well, make your own mind up about that.

Majority private ownership?

We don’t know how much of the publicly owned stake will be up for sale. But apparently it will be no more than 15% of the share volume currently being traded. Still, it does sound as if NatWest will be back in majority private hands before much longer.

What does it mean for shareholders? For one thing, it should free the board’s hands a little when it comes to returning capital. The bank has already indicated its intention to pay some as dividends. Analysts are predicting a yield of around 3.3% this year.

Maybe now NatWest can consider share buybacks too, once the danger of concentrating the government’s majority stake has passed. If it did that, it would show a belief that the shares are too cheap. And that might give the price an upwards nudge.

NatWest share price attractive?

So would I buy NatWest shares today? I already have some Lloyds, and one FTSE 100 bank is probably enough for me right now. And we do face the risk of a very uncertain economic future in the short to medium term. Investing in banks at the moment is not without risk.

But I do like NatWest’s robust-looking balance sheet and strong liquidity metrics. And if we see progress in returning some of the bank’s accumulating cash pile to shareholders, I might go for it. I’m going to be watching the NatWest share price closely.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft owns shares of Lloyds Banking Group. The Motley Fool UK has recommended 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.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »