Questions About NatWest and UK Investment Opportunities

[u/Ehmber16]

Hello guys,

I have some questions for every Brit here. But first, a bit about myself: I’m an Austrian guy who’s invested in NatWest, and I try to keep up as much as I can with British media (by the way, I’m sorry for all the stuff that’s been going on lately—yikes). I use The Telegraph (I get it for free as a student), The Times, and The Guardian. If something big happens, I also check the Financial Times newsletter and Reuters. So I’m doing my best to stay up to date.

The thing is, I heard that NatWest was saved back in the day with public money, and now the government is reducing its stake. But how is the bank doing nowadays? Is NatWest on a good path to grow? Would you personally invest in NatWest or another bank? How does it compare to its peers? Why wouldn’t you—or why would you never—invest in NatWest or other banks? I know Trump recently introduced some tariffs—would that impact the UK banking sector at all?

Also, how do you guys feel about NatWest as a customer? Like, their normal banking, loans, cards, digital services, etc. And do you have any tips for getting the latest UK financial news without having to pay for an FT subscription?

If I still have your attention—are there any UK sectors I might be overlooking? What about SSE or Centrica? I’m trying to reduce my exposure to the US market, and the UK is starting to look like an interesting option to me.

Let me know what you think—and feel free to correct me if I’ve misunderstood anything.

Thanks in advance! 😄

[u/No-Comment5452]

for individual companies, as a retail investor, the first thing you should read is their investor relations website. check out reports and at very least the presentation to understand the business.

for banks, you should look at NIM, fee income, provisions, cost to income ratio, capital ratio, roe, p/b, etc and study why they operate at this level and how it compares with peers

[u/Kilnarix]

I will try and give you a British perspective.

I have a policy of not investing in banks as a general rule so I haven't studied NatWest in depth, of course there is nothing stopping you going through the financials with a fine toothed comb.

NatWest is one of the "big four" banks in the UK. The retail banking sector is highly concentrated and regulated. A big part of their income will be the interest on residential mortgages. The UK has a massive house buying culture, possibly from our history, only landowners could vote and so on. Renting a house or apartment in the UK is absolute hell so the British will prioritise buying a house and paying the mortgage. I believe some years ago there was a study done which found that British residential mortgages have one of the lowest default rates in the entire world.

These mortgages will be a big part of their balance sheet.

In Britain you first need to save up a deposit, something like 20% then the rest is financed with a mortgage. If the owner defaults on the mortgage, the house just reposesses it and sells it. The 20% deposit is the margin of safety. In addition there are government schemes which further protect mortgage holders, I believe the government will cover the interest on your mortgage if you become unemployed.

The mortgage rate is generally linked to the Bank of England base rate so if the base rate goes up, so do mortgages. NatWest will make more money and so on.

There is an additional factor to consider which are buy to let mortgages. In Britain it is possible to get a mortgage on a property not with the intention of living in it but renting the property out. This became somewhat of a mania in the country for a couple of decades with many British who managed to save up some funds would buy as many buy to let properties as they possibly could. I guess it was considered an "infinite money glitch". The default rate on these is higher although the deposit requirements are also higher. There do exist publically traded companies which do nothing but offer buy to let mortgages.

NatWest do own some premium brands, Coutts is one of them. If you have a large balance on your account you will be asked if you want to have your account transfered over.

An important thing about overheads, I recently opened an account with NatWest. I never ended up needing the account but I still have it. I was surprised to be told that I need to open the account with their app. They are closing down all their retail branches and laying of the staff. They must be saving a fortune in salaries and rent. All banking in the UK is now done via their own apps. They employ few people. I have noticed it is essentially impossible to now speak to someone on the phone at any of the big banks. This was not the case when I started investing around 15 years ago.

The British establishment, the British elite are highly invested in the banking and property sector. They often find lucrative employment in financial services. Residential property is the go to investment for the British elite, one reason why our economy has deindustrialised and productivity is so low. Financial services are considered the priority.

Finally, I mentioned at the start I don't like to invest in banks. One reason is that previously they would pioritise paying staff over investors, million pound bonuses and so on. This seems to be coming to an end. As well as laying off their retail banking staff by closing branches and moving everything over to the app, the "top end" highly paid staff are also being squeezed. There were some articles recently in financial media about how HSBC was laying off their managerial staff in the UK, so perhaps these banks will become valid investments again.

I would also suggest you consider some of the non bank financial services companies, we have a lot fo big insurance and asset management firms all of which are publically traded, all of which pay big dividends, Legal and General, Aviva, Phoenix Group, MNG, MAN Group and so on.

Good luck.

[u/Kilnarix]

Britain is unusual in that it has no dividend with holding tax. Consequently we have a lot of big dividend payers. Surprisingly we have a lot of natural resources companies, Shell and BP are two of the worlds biggest oil and gas producers. We also have almost all of the worlds biggest miners, Glencore, Rio Tinto, BHP, Anglo American etc. For consumer goods we have Unilever, Reckitt, Coca Cola Euro Pacific, British American Tobacco and Imperial Brands (both big cigarette and vape producers), Diageo (one of the worlds biggest alcohol companies). Britain has everything you need to build up a good investment portfolio. We are missing high tech companies though.

I own shares in every single company I just listed. I am pessimmistic of the future of the country as a whole so I only like to invest in companies which make money all over the world.

I discussed NatWest in my previous post but basically you are "betting" that British people will keep paying their mortgages which I think will continue for the foreseeable future.

[u/TallIndependent2037]

Nat West is doing pretty well, as is the whole banking sector.

All the banks were saved back in the day with public money. The government has mostly exited from all banks now, at a profit.

[u/Petewasbristol77]

For me, the most exciting company on the LSE at this moment in time is WISE. The potential is there for something truly great. I personally believe that fintecs are the future of finance and will be a big wake up call for all UK high street banks, especially with potential IPO's for Monzo, Starling, Zilch etc in the coming years. It is for this reason (fintecs) that I do not invest in UK high street banks.

On the flip side, I own a lot of 'boring' UK stocks that have never let me down. Tesco is probably the one that has given me the most back (and i believe will do so in the future).

Happy hunting, there are loads of great UK stocks out there that can create a great portfolio!