Natwest in strong form ahead of earnings

[MongiIG]

UK banks have been bolstered by recent UK rate rises, and despite some weakness thanks to Ukraine tensions the overall move higher is intact.

Source: Bloomberg

 Chris Beauchamp | Chief Market Analyst, London | Publication date: Tuesday 15 February 2022 

As the first of the big UK banks to report, NatWest will give us a flavour of how the sector is faring.

Higher rates have been a boon for the sector generally, and in the UK of course the sector has already benefited from the Bank of England (BoE)’s decision to hike rates. Further increases are expected, so this source of improving profitability should strengthen as time goes on.

A boost to the dividend and even a share buyback programme appear to be on the cards, providing a justification for the rise in the shares over the last year. However, with much good news now in the price and worries about the impact of inflation (especially high energy and fuel prices) on consumer spending continuing to rise, the shares might be entering a tougher patch.

The ongoing ascent of the share price has seen it reach levels not seen since the end of 2019. Gains have stalled recently at 250p, but the broader long-term uptrend is certainly intact, as is the one from late November 2021, with the dip yesterday and today’s lows both testing and holding rising trendline support.

A deeper retracement below 240p would bring 230p and then 218p into view, while a more bullish view requires a bounce back above 250p.

Source: ProRealTime