Stock market

As the NatWest share price closes at a new 5-year high, is it too late to buy soon?

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It was called the Royal Bank of Scotland, and collapsed without a government bailout. But over all these years, and after the name change, it seems. Natwest Group (LSE: NWG) share price is back.

Moving backwards, that is. The last 12 months have been uneventful. But as I write, NatWest shares are just a shade below a five-year high in January 2023.

NatWest is now up 18% over the past five years. FTSE 100. And surely it won’t be long before we see a new post-Covid peak?

Value

After such a positive start in 2024, what does the prognosis look like? Well, on basic measures, banks still look all cheap — in comparison FTSE 100 Average, at least.

For NatWest, we are looking at a forecast price-to-earnings (P/E) ratio of less than eight. And the 2024 dividend forecast suggests a yield of 5.5%, rising to more than 6% by 2026.

But then, we need to balance that with a tough year for banks so far.

NatWest’s Q1 update showed a 26% drop in profit compared to the same quarter a year ago. And it was down 23 percent in the last quarter of 2023.

Lloyds Banking Group And Barclays In the first quarter as well, the profits of both have decreased. So it is clear that the banking sector is still under pressure.

interest rate

And when the Bank of England finally starts to cut interest rates, it could hurt banks in the short term before the benefits start to show. A lower interest rate should mean a lower return on net interest.

And then, there’s one more thing that could hold back NatWest’s share price. And this will surely have a knock-on effect on the entire sector.

The thing is, after the bailout from the bad old Royal Bank of Scotland days, the government still owns 30% of the bank stock.

And it will sell this year, possibly a large portion of it. It would have to be at an attractive price, and it could undercut the stock on the open market.

Timing

NatWest is on my list of candidates for my next stocks and shares ISA purchase. And part of me thinks I should wait until the government shares are sold. Or, at least, much lower than today’s level.

But then, I have to remind myself that every time I’ve tried to time the market, I’ve gotten it wrong. And that’s why I don’t do it anymore.

I mean, if the share price goes up in the next few months, dip a little bit on the sell, I can still lose.

New record

So, whether I buy Natwest or not will just depend on its price and alternatives. And I’ll keep an eye out for a fall this year.

Will NatWest’s share price break this 2023 peak? By the time you read this, it will have already done so.


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