NatWest Group shares found stability in Tuesday's London trading, hovering around 621 pence after a steep 6% decline the previous session. The stock moved within a narrow range, reflecting investor caution after the bank's major strategic announcements.
Deal Details and Capital Impact
The bank confirmed its acquisition of wealth manager Evelyn Partners for an enterprise value of £2.7 billion, alongside a £750 million share repurchase program. CEO Paul Thwaite described the move as a compelling strategic use of capital, projecting roughly £100 million in annual cost synergies. However, the transaction will lower NatWest's core equity tier 1 ratio—a key measure of financial strength—by approximately 130 basis points.
Notably, NatWest indicated its next buyback announcement won't occur until the first half of 2027, with the acquisition expected to close in summer 2026 pending regulatory approvals. This timeline creates a prolonged period of reduced capital return visibility for shareholders.
Market Context and Analyst Views
The announcement arrived during a pivotal week for UK banking, with Barclays and NatWest both reporting results. Investors are assessing how potential interest rate declines might affect lending margins and credit quality across the sector.
Some analysts viewed Monday's selloff as a valuation concern rather than a strategic rejection. Morgan Stanley noted the acquisition makes strategic sense but comes at a cost, expecting a modest drag on tangible net asset value compared to alternative capital uses, while forecasting broadly neutral earnings per share impact by 2027.
For shareholders, the trade-off involves gaining scale in wealth management fee income against reduced buyback certainty for over a year. This dynamic will likely keep the stock sensitive to any updates on integration progress and capital target achievement.
Looking Ahead
Attention now turns to NatWest's annual results scheduled for Friday, February 13. Market participants will scrutinize detailed CET1 headroom, updated buyback timing, and whether the deal's financial assumptions remain intact as the bank outlines 2026 targets and initial integration milestones.
Potential risks include integration challenges, synergy shortfalls, or regulatory delays, which could further constrain capital returns just as the interest rate cycle becomes less favorable for bank earnings.
