When I’m looking to buy a FTSE 100 stock, there are two important things I need to consider. Firstly, I need to figure out if now is a good time to buy the stock. Secondly, I want to be comfortable in the idea of holding the stock for years (even decades) to come. Here’s why I think that NatWest Group (LSE:NWG) shares fit the bill in this regard.
A growing bank
The group contains NatWest, but also includes other brands including RBS, Coutts, and Ulster Bank. This means that at a group level, there’s exposure to a wide array of banking. This includes retail banking, private banking, and also investment and capital market divisions.
The UK government is a large shareholder of the group, owning over 50% following the 2008 crisis. The government is slowly selling NatWest shares, including a £1.1bn selloff back in May. I personally see this as a good thing. As long as some of the business is in public hands, it’s unlikely to seriously struggle financially. I find it highly unlikely that the government would let the bank fail, given the amount of public funds already invested in it.Â
Why I like the company
The reason I’d hold NatWest shares for a decade or more is reflected in the long-term performance. Over one year the share price is up 103%. Over five years the share price has shown a 27% gain. The reason I’d buy it now is because the growth over the past year looks like it could continue.
In an increasingly digital space, NatWest has won several awards for having the best mobile banking app. It has also recently bought RoosterMoney, an app that is geared towards pocket money and financial education for children. I think the continued investment into both the app and the online system will allow NatWest to grow market share simply by offering people a more convenient and easy-to-use banking system.
I also noted that the private wealth management industry is expected to grow at an annual rate of 9% a year through to 2025. I think the private banks including Coutts (that are within the NatWest Group), should benefit from this. The diversification of banking streams that this provides is also another plus for potential investors.
Risks for NatWest shares
One risk here is a potential lack of controls in place regarding money laundering prevention. It recently pleaded guilty to a case of failure to notice or prevent laundering worth hundreds of millions of pounds from a client. It faces a fine in this regard, something that’s damaging for the reputation of the bank.
Further, NatWest shares could come under pressure as the banking space is becoming increasingly competitive. Fintech firms are gaining traction, shown by recent new listings including Wise. The focus on digitalisation (mentioned earlier) will be key to holding market share for NatWest.
Overall, I am considering buying shares in NatWest Group as I think it gives me access to a broad range of different companies in the banking space.