NatWest share price dips after the Evalyn buyout as traders eye Q4 earnings

NatWest share price suffered a harsh reversal, moving from a high of 704p on February 4 to the current 633p. This retreat happened after the company announced its buyout of Evelyn Partners ahead of its upcoming earnings. It has also formed a few bearish chart patterns, pointing to more downside in the near term.

NatWest acquires Evelyn to boost its wealth management business

NatWest, formerly known as Royal Bank of Scotland, announced that it was acquiring Evelyn Partners in a deal valued at over £2.7 billion. It bought the company from Permira and Warburg Pincus, popular companies in the private equity industry.

The deal will give NatWest over £67 billion in assets and help to provide NatWest with substantial fee income in the future. The fees will help it to offset the net interest income (NIM) now that the Bank of England (BoE) has hinted that it will cut interest rates.

It also helps the company to diversify its business in the high lucrative private banking and wealth management business. In a statement, Paul Thwaite said:

“This represents a strategically and financially compelling use of capital, enhancing income diversification and strengthening returns in a high‑growth segment, to deliver sustainable long‑term value creation.”

It is common for a company’s stock to drop when a company announces a major acquisition. 

Other UK banks have made such buyouts in the past. For example, Lloyd’s Bank acquired Schroders Wealth last year, while HSBC bought Citigroup’s retail wealth management in China.

NatWest to publish its earnings 

The next important catalyst for the NatWest share price will be the upcoming financial results, which will come out on Friday this week. 

Analysts expect the company’s revenue and profitability growth to continue in the coming years. The consensus view is that the Net Interest Income (NIM) jumped to £3.32 billion, bringing the full-year figure to £12.7 billion. NatWest made over £11.27 billion in NIM in the previous year.

Analysts also expect the company’s growth to continue in the coming years, with NIM rising to £13.89 billion, £14.7 billion, and £15.21 billion in the next three consecutive years.

The total income is expected to come in £4.214 billion, bringing the full-year figure to £16.53 billion. It will then jump to £17.52 billion this year and £18.5 billion and £19 billion in the next two years.

Chances are that the company will publish stronger results than expected, mirroring the performance of other European banks like Unicredit, Société Générale, and Deutsche Bank, which published strong numbers and boosted their guidance.

NatWest share price technical analysis

The weekly chart shows that the NWG share price has pulled back in the past few weeks, moving from a high of 704p to the current 633p.

It formed a shooting star pattern, which is made up of a small body and a long upper shadow. The Relative Strength Index (RSI) has pulled back from the overbought level of 70 to the current 60. 

Similarly, the two lines of the MACD indicators have formed a bearish crossover pattern. Therefore, the most likely scenario is where the stock continues falling, potentially to the key support level at 600p. On the other hand, a move above the year-to-date high of 704p will invalidate the bearish outlook.

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