Shares Plunge at Edinburgh Bank Giant Following ‘Transformative’ Deal Announcement

In a significant move, NatWest announced plans to acquire Evelyn Partners, which could become the bank’s largest deal since its £45.5 billion bailout during the 2008 financial crisis. This acquisition is projected to transform NatWest’s private banking and wealth management sector.

Details of the Evelyn Partners Acquisition

CEO Paul Thwaite expressed confidence in the deal, describing it as the “right transaction at the right time.” He emphasized its strategic importance and potential financial benefits. If the deal receives the required regulatory approval this summer, NatWest’s assets under management and administration (AUMA) would rise to over £127 billion, thanks to Evelyn’s £69 billion contribution.

Financial Implications

• The acquisition is anticipated to generate a return on tangible equity within the first year.
• It is expected to yield higher returns than the bank’s previously announced £750 million share buyback.

Despite these projections, NatWest’s shares fell nearly 6% following the announcement. Analysts raised concerns about the deal’s capital allocation. Gary Greenwood from Shore Capital noted an expected shortfall of £2 billion in anticipated buybacks for the upcoming financial year.

Management and Strategic Growth

Thwaite maintained that acquiring Evelyn represents a strong capital deployment and aligns with their long-term goals. He highlighted the importance of the cultural fit and synergies between NatWest and Evelyn, aiming for cost synergies of approximately £100 million.

Evelyn Partners, which has a workforce of around 2,400, was formed from the merger of Smith & Williamson and Tilney in 2020. It boasts a strong team, including 270 financial planners and 325 investment managers, who have achieved over 7% compound annual growth in AUMA.

Earlier in 2024, NatWest expanded its portfolio with the acquisition of Sainsbury’s Bank retail business and a residential mortgage portfolio from Metro Bank. Thwaite noted that the bank’s return to private ownership did not alter its strategic direction, which has been in place for over 18 months.

The future of Evelyn’s brand names remains undecided, pending regulatory approval for the acquisition. On the day of the announcement, NatWest shares closed at 620p, down 39.4p.

Conclusion

As NatWest seeks to enhance its wealth management capabilities through the Evelyn Partners acquisition, the financial community will be closely monitoring the deal’s developments and its impact on the bank’s performance.