NatWest Group shares: big picture optimism?

After dropping back from their recent peak, independent analyst Alistair Strang reveals the key numbers for NatWest shares.

In virtually every marketplace, the last week has been almost amusing. In several countries, financial institutions were reporting record profit levels yet, when the news was released, the share price would reverse. It was very much an instance of “buy on the rumour, sell on the news”, but the media, of course, fought hard to discover other reasons for the reversals.

In the case of NatWest Group (LSE:NWG), the principal cause of the reversals was blamed on a potential change in interest rates next Thursday with two evil members of the Monetary Policy Committee refusing to give any clue as to their thinking, thus apparently causing uncertainty.

Then again, NatWest also recently pleaded guilty in a money laundering court case, the bank being accused of failing to monitor the activity of one of its clients between 2012 and 2016. As a result of the guilty plea, the bank anticipates a fine of around 250 million, rather than 340 million had they contested the case.

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A little digging revealed a hilarious fact of the case. The client had been depositing bags of cash, amounting to £264 million over the period. The client's business plan had anticipated turnover of £15 million per annum. Once upon a time, bank branches had managers who paid attention to this sort of thing, now mostly pensioned off to golf courses.

I’ve a personal memory of once depositing several thousand pounds in cash from a retail business, only to receive a call from the manager asking why there were so many £100 notes in the bag. The total value was fairly normal, the presence of £100 notes was something out of the ordinary.

The explanation was quite basic. His branch had given them to me the previous day as I was viewing an old car called a MGB V8. On viewing the heap of rust held together by paint, common sense reared its head and the money swiftly returned to the bank.

When we previously reviewed NatWest, we had a scenario suspecting movement to 233p, something the share price has achieved.

In fact, it marginally exceeded the 233p level, achieving 235p on several days and closing slightly above 233p also. This is something we tend to regard as a good thing, nudging the share price into a region where some Big Picture influences shall hopefully make themselves known. The recent 5% drop in the share price, while an issue, isn’t terribly alarming as it makes us suspect slight reversals may occur before a surprise upward surge.

Source: Trends and Targets. Past performance is not a guide to future performance

The immediate situation suggests weakness below 229p shall bring travel down to an initial 213p with secondary, if broken, at 205p. Neither scenario is particularly alarming, taking the price to the levels of the prior low.

Instead, we now hope for movement above 235p to bring a surge to an initial 253p. With closure above 253p, the Big Picture now calculates with a longer term attraction at 330p.