NatWest Group (LSE:NWG) is reportedly planning to establish a representative office in the United States, and, according to one analyst, it is not a slam dunk of an idea.
Gary Greenwood, analyst at Shore Capital Markets, reckons the bank's jaunt to the USA should be watched closely, given the banking sector's long history of overseas expansion destroying shareholder value, not least the example of NatWest's own predecessor, RBS.
Shore Capital's commentary follows a Financial Times report that claimed NatWest's intention is to open a US office to support existing clients and build relationships with prospective customers.
According to the FT, the manoeuvre is related to changes in the UK ringfencing rules, introduced under former Chancellor Rachel Reeves.
UK stockbroker Shore Capital, which rates NatWest as a Hold, with a 650p price target, which implies around 6% downside against a current share price of 689p.
Greenwood describes the potential expansion as an early reversal of the strategy NatWest has pursued since the global financial crisis, when the group withdrew from international markets to focus on its domestic franchise. The analyst, in the note, said he sees nothing yet to suggest a material shift in capital allocation or risk appetite, but says the move signals a willingness to pursue growth outside the UK and accept added execution and strategic risk.
For now, Shore Capital describes the potential strategy as "incremental rather than transformational", but flags the sector's poor overseas expansion track record, most notably RBS's own ill-judged international growth, as a reason for caution.
NatWest trades on 1.8 times forecast tangible net asset value for the 2026 financial year, a multiple Shore Capital says assumes the group's forecast return on tangible equity of roughly 20% can be sustained indefinitely.
Greenwood, meanwhile, argues current profitability benefits from supportive interest rates and benign credit conditions, and expects competitive pressure and regulatory scrutiny, including possible additional taxation, to intensify as returns normalise over time.
