By NatWest (NWG) share price has done well this year as the UK economy has remained more resilient than expected. It jumped to the year-to-date high of 365.2p in July, and then retreated to 303p as the Japanese yen carry trade unwind happened in August. It then bounced back and retested its highest level this year.
NatWest has done well this year
The British economy has held steady this year and is doing better than most of its European peers. Data released last week showed that the country’s retail sales rebounded in September, while inflation continued falling.
The International Monetary Fund (IMF) decided to boost its economic forecast for this year. It expects the UK will grow by 1.1%, higher than the previous guidance of 0.7%.
The agency, however, warned about the country’s substantial public debt as deficits continue rising.
NatWest – and Lloyds Bank – are often seen as barometers of the UK economy because they are the biggest lenders. They also don’t have large operations outside the country, unlike other big banks like HSBC and Barclays.
NatWest does that through its ownership of its eponymous bank and other brands like Royal Bank of Scotland, Ulster, Coutts, Lombard, and Adam & Company. Its business has almost 20 million customers in the country.
The next important catalyst for the stock will be its earnings, which will come out on Friday. These numbers will come two days after Lloyds Bank published strong results, which were better than estimates. Its profit jumped to £1.21 billion, while its return on tangible equity rose to 15.2%.
Net interest income continued falling, moving to £9.6 billion, a drop from 8% in the same period last year. NII dropped because of the tightening of the spread between what it gives customers and what remains.
NatWest earnings ahead
NatWest will publish its financial results on Friday. The previous numbers showed that its attributable profits rose to £2.09 billion in the first half of the year, while its return on tangible equity rose to 16.4%.
Its net interest margin in the second quarter rose to 2.10%, while its net income came in at £987 million.
Analysts expect that NatWest’s net interest income for the quarter will be £2.78 billion, higher than the £2.75 billion it made last quarter. They also expect that its profit for the period will be £1.059 billion.
Looking ahead, analysts expect that NatWest’s net interest income will be £11.0 billion this year from £11.049 billion last year. It will then rise to £11.54 billion and £12.2 billion in the next two years. Its annual profit will hit £4.58 billion in 2026, higher than £4.7 billion last year.
NatWest’s performance will be impacted by the next actions by the Bank of England (BoE). Like other big central banks, it has also started to cut interest rates this year. It slashed rates by 0.25% a few months ago and is expected to cut again in the next meeting.
The BoE’s interest rates remain higher than other European countries, meaning that its NIM will be better than other European banks.
The other potential catalyst for the stock will be the upcoming budget, in which Rachel Reeves is expected to announce measures to fill a large £22 billion gap. In her October 30th budget, Reeves is considering changing the definition of debt, a move that will help her cut some taxes.
In the past, as we saw during Lizz Truss era, the budget reading can lead to more volatility in the UK stock market.
NatWest share price forecast
NWG chart by TradingView
The daily chart shows that the NWG share price has been in a strong bull run in the past few months. It has risen from a low of 157p in October last year to 365p.
The stock has remained above the ascending trendline that connects the lowest swing since June 14. It has remained above the 50-day and 100-day Exponential Moving Averages (EMA), meaning that bulls are in control for now.
NatWest has also remained above the ascending trendline that connects the lowest swing since June 14. It has also moved above the 23.6% Fibonacci Retracement point.
However, there are signs that it has formed a double-top pattern, a popular reversal sign in the market. Therefore, the outlook for the stock is neutral as long as it remains below the resistance point at $35.
A break above that level will point to more gains, with the next point to watch being at 400p. The alternative scenario is where the stock retreats and retests the 50-day moving average point at 343p.
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