NatWest’s share price saw a drop following its decision to acquire Evelyn Partners for £2.7bn and announce a £750m share buyback for Q4. The suspension of future buybacks until 2027 contributed to this decline.
This reaction could also be due to profit-taking ahead of NatWest’s full-year results. Some analysts believe the M&A might offer reduced returns compared to buybacks, but long-term investment could add value.
Potential Aftermath of Suspended Buybacks
A similar scenario occurred with HSBC when they suspended buybacks to acquire the remaining stake in Hang Seng. After an initial drop, HSBC’s shares eventually rose as shareholders recognised value in the acquisition.
NatWest’s purchase of Evelyn Partners mirrors Lloyds Banking Group’s acquisition of Schroders, aiming to diversify their business model by investing in wealth management. This acquisition doubles NatWest’s assets under management, suggesting potential for increased profitability if managed effectively.
We are seeing a classic market overreaction to the Evelyn Partners news, with NatWest shares falling around 5% to 295p today. This sharp move has pushed 30-day implied volatility up by over 25%, creating a clear opportunity for us. The market is mistakenly focused on the delayed buyback rather than the long-term strategic value.
Market Reaction and Volatility Strategy
This spike in volatility makes selling out-of-the-money puts particularly attractive in the coming weeks. By selling, for example, a March 280p put, we can collect an elevated premium from the current fear in the market. This strategy profits as long as the share price does not fall significantly further by expiration.
We saw this exact pattern play out last year with HSBC’s Hang Seng deal in October 2025. The initial reaction was a similar sell-off, with the stock dropping nearly 4% before it rallied over 15% in the following three months. The market eventually rewarded the long-term strategic thinking, and we expect NatWest to follow a similar path.
This deal is not lazy; it is a smart move to diversify revenue streams away from pure lending, which is sensitive to interest rate cycles. Adding Evelyn’s £65 billion in assets significantly boosts NatWest’s wealth management arm and its fee-generating income. Consensus price targets from major banks remain well above 350p, indicating the City understands the long-term value here.
