{"id":45958,"date":"2026-05-22T18:52:53","date_gmt":"2026-05-22T18:52:53","guid":{"rendered":"https:\/\/www.europesays.com\/britain\/45958\/"},"modified":"2026-05-22T18:52:53","modified_gmt":"2026-05-22T18:52:53","slug":"why-natwest-investors-should-baulk-at-the-2-7bn-evelyn-deal","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/britain\/45958\/","title":{"rendered":"Why NatWest investors should baulk at the \u00a32.7bn Evelyn deal"},"content":{"rendered":"

In its former guise as the Royal Bank of Scotland, NatWest (NWG) made the infamous and catastrophic acquisition of ABN Amro at the wrong price and the wrong time. Almost two decades on, the bank has made its first major piece of M&A since the government finally exited its ownership stake last year<\/a>. Unlike\u2009the ABN Amro move, its \u00a32.7bn deal to buy private equity-backed wealth manager Evelyn Partners has much to commend it strategically, but we have reservations about the economics. <\/p>\n

NatWest could have found a better week for disclosing a multi-billion pound wealth manager acquisition. On the day the deal was announced on 9 February, UK prime minister Keir Starmer was almost forced from office<\/a>. Then, two days later, there was a sell-off of wealth management shares as US company Altruist\u2019s release of an AI tax-planning tool sent fears about technological disruption spreading throughout the market.<\/p>\n

The 10 per cent fall in the bank\u2019s share price since the Evelyn announcement shouldn\u2019t be dismissed as mere market froth. There are good reasons for investors to be wary of the mechanics of the deal. <\/p>\n

From a strategic point of view, NatWest\u2019s move is a sensible piece of business given concerns about its relative lack of non-interest income compared to rivals. Assuming the transaction completes this summer as planned, the bank\u2019s income from fees will grow by a fifth, with Evelyn\u2019s planners and BestInvest platform lending it much greater appeal to the wider wealth market than Coutts, the private bank already owned by NatWest. The combined group will have \u00a3127bn of assets under management (AUM), making it the third biggest UK wealth player behind St James\u2019s Place (STJ) and Quilter (QLT). <\/p>\n

Yet there are potential problems ahead for NatWest because of the takeover price and questions about relative returns from the deal versus the return of capital. <\/p>\n

The deal\u2019s enterprise value of \u00a32.7bn values Evelyn at 5 times revenue, 3.9 per cent of AUM, and 9.7 times earnings before interest, tax, depreciation and amortisation (Ebitda). As the chart below shows, NatWest hasn\u2019t struck a bargain here: <\/p>\n

A key question for investors is how potential returns from the acquisition compute against those from share buybacks. The bank expects the deal\u2019s return on investment (ROI) to be greater than the c. 11 per cent from buybacks by 2028, when revenue synergies are included. <\/p>\n

Chief financial officer Katie Murray told analysts there is \u201cno concern around the strength of that return.\u201d<\/p>\n

Evelyn generated \u00a3179mn of Ebitda in 2025, which gives an ROI of around 8 per cent once expected cost synergies of \u00a3100mn are accounted for. However, that Ebitda figure strips out lines from the accounts including significant levels of depreciation and amortisation (\u00a3112mn in 2024). <\/p>\n

As Shore Capital analyst Gary Greenwood pointed out, these figures \u201cwould materially reduce ROI if included.\u201d He cautioned that the deal economics \u201crely heavily on synergy delivery to justify the price.\u201d<\/p>\n

Much depends on the scale and success of revenue and cost synergies. Evelyn delivered AUM growth of more than 7 per cent on a compound annual growth rate (CAGR) basis between 2023 and 2025. Although, anecdotally, one wonders how much that is due to the growth in US-exposed portfolios; can riding the coattails of the AI boom really be good justification for the multiples paid on NatWest\u2019s acquisition? <\/p>\n

NatWest now doesn\u2019t expect to confirm another share buyback until its 2027 half-year results, given the deal and a new (lower than expected) \u00a3750mn buyback will take its common equity tier 1 (CET1) ratio below its 13-14 per cent target range. <\/p>\n

Analysts at Jefferies argued that \u201cthe reality is that NatWest shareholders are left with broadly the same cash-flow proposition as before.\u201d They forecast an unaffected dividend per share (DPS) in the short term and a 2 per cent drop in the long term as a result of the deal. <\/p>\n

The Evelyn move should be seen in the wider context of banking sector interest in wealth management as a revenue diversifier. Barclays (BARC) and Lloyds Banking Group (LLOY), the latter of which took full control last year of the wealth management joint venture it had with Schroders (SDR), were reportedly also interested in buying Evelyn. Quilter is another company to watch as a potential takeover target.<\/p>\n

NatWest needs to drive up fee-based income. Yet deal risk has led us to change our recommendation on the shares. The bank, which recently dropped off our Alpha earnings upgrade momentum screen<\/a>, reported profit growth of a quarter and raised its return on tangible equity (ROTE) guidance in annual results this morning. See our take on that here<\/a>. <\/p>\n","protected":false},"excerpt":{"rendered":"In its former guise as the Royal Bank of Scotland, NatWest (NWG) made the infamous and catastrophic acquisition…\n","protected":false},"author":2,"featured_media":45959,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[21386],"tags":[21176,21178,7955,613,702],"class_list":["post-45958","post","type-post","status-publish","format-standard","has-post-thumbnail","category-natwest","tag-alpha-weekly-analysis","tag-income-investing-dividends","tag-natwest","tag-opinion","tag-stocks-shares"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@UnitedKingdom\/116619746072969375","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/45958","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/comments?post=45958"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/45958\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media\/45959"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media?parent=45958"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/categories?post=45958"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/tags?post=45958"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}