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It used to be called Royal Bank of Scotland and would have failed without a government bailout. But after so many years and after a name change, it seems that the NatWest Group (LSE: NWG) share price is back.
Grow back, that is. The last 12 months have been erratic. But as I write, NatWest shares are just shy of the five-year high they hit in January 2023.
NatWest is up 18% in the last five years, ahead of the FTSE 100. And surely it won't be long before we see a new post-Covid peak?
Valuation
After such a positive start to 2024, how do you see valuation? Well, fundamentally speaking, all the banks still look cheap, compared to the FTSE 100 average, at least.
For NatWest, we're looking at a forecast price-to-earnings (P/E) ratio of less than eight. And dividend forecasts for 2024 suggest a 5.5% yield, growing to more than 6% in 2026.
But then we have to balance that with a difficult year for banks so far.
NatWest's first quarter update showed a 26% drop in profits, compared to the same quarter a year earlier. And it was 23% less than in the last quarter of 2023.
Lloyds Banking Group and Barclays Both have also reported declines in profits in the first quarter. It is therefore clear that the banking sector is still under pressure.
Interest rates
And when the Bank of England finally starts cutting interest rates, it could hurt banks in the short term before the benefits start to show. Lower interest rates should mean lower net interest earnings.
And then, there's something else that could be holding back NatWest's share price. And it will surely have a knock-on effect throughout the sector.
The thing is, after the rescue from the bad times of the Royal Bank of Scotland, the government still owns 30% of the bank's shares.
And it will sell that, possibly a large portion of it this year. It will have to be at an attractive price and could hurt the stock on the open market.
Moment
I have NatWest on my shortlist for my next stocks and Shares ISA purchase. And part of me thinks I should wait until the government stake has been sold. Or, at least, very reduced compared to the current level.
But then I have to remind myself that every time I've tried to time the market, I've been wrong. And that's why I don't do it anymore.
I mean, if the stock price rises in the next few months and then drops a bit on the sale, you could still lose out.
New record
So whether or not I buy NatWest will depend solely on its value and the alternatives. And I'll keep an eye out for the possibility of falls this year.
Will the NatWest share price surpass that 2023 peak? You may have already done so by the time you read this.
