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Macroeconomic volatility has shone a spotlight on many FTSE 100 stocks for me. Some could be potentially smart additions to my holdings, in my opinion. One option I want to dig deeper into is Natwest (LSE: NWG).
The struggle continues
It’s fair to say banking shares have struggled for some years. In fact, I’d go as far as saying they’ve never really recovered from the financial crash of 2008, at least from a share price perspective. Natwest isn’t alone in this, Lloyds Banking Group is another prime example.
Since that time, one crisis or issue has hampered the stocks. Brexit, the pandemic, and most recently, economic turbulence have halted the shares from climbing.
Natwest shares are down 28% over a 12-month period from 296p at this time last year, to current levels of 213p. Interestingly, the shares surpassed the 300p mark in January 2023 for the first time in five years, just before macroeconomic volatility grabbed hold of markets and the shares fell once more.
Better times ahead or more issues?
Despite share price issues, Natwest has still been a profitable business and its standing and profile in the UK banking ecosystem is enviable.
Digging deeper, Natwest shares look very attractive right now on a price-to-earnings ratio of just five. This is lower than HSBC and Lloyds at present.
In addition to this, a dividend yield of over 7% is substantially higher than the FTSE 100 average of 3.8%. Plus, broker forecasts show this yield rising in the next two years. However, I’m conscious that forecasts don’t always come to fruition and dividends are never guaranteed.
Higher interest rates in recent months have helped boost the coffers for Natwest, and other banks. At the same time, the risk of loan impairments and defaults has also increased. The changing economic picture is difficult to judge. This uncertainty is not a great feeling for me when considering parting with my hard earned cash.
Another risk I need to bear in mind is the fact that the UK government owns 38% of Natwest. This is back from when it was known as Royal Bank of Scotland and it needed a huge bailout. If the government decides to sell this stake, what could happen to the shares and sentiment?
Finally, Natwest recently lost chief executive Alison Rose after the Nigel Farage account debacle. This type of unexpected change is rarely good for investor sentiment.
What I’m doing now
I must admit my decision is not going to be swayed by short-term issues. These include current macroeconomic volatility and the recent scandal mentioned earlier.
I’m a long-term investor, but I do understand investments come with challenges and the economic picture poses a risk for shorter-term issues. However, looking further forward, Natwest shares look really attractive for me right now with a great valuation and passive income opportunity.
I’d be willing to add some shares to my holdings the next time I have some cash. This could offer my holdings the exposure to a top banking stock.
