NatWest’s share price fell after it decided to buy Evelyn Partners for £2.7 billion and announced a £750 million share buyback for the fourth quarter. The plan to hold off on future buybacks until 2027 also contributed to this drop.
This reaction might stem from investors taking profits ahead of NatWest’s full-year results. Some analysts think the merger and acquisition (M&A) might yield lower returns than buybacks, though they believe it could add value in the long run.
A similar situation happened with HSBC when it paused buybacks to purchase the last stake in Hang Seng. Initially, HSBC’s shares dropped, but they later rose as shareholders saw the value in the deal.
NatWest’s acquisition of Evelyn Partners is similar to Lloyds Banking Group’s purchase of Schroders, which aims to diversify their business by venturing into wealth management. This deal doubles NatWest’s assets under management, hinting at the potential for increased profits if managed well.
Currently, the market is overreacting to the Evelyn Partners news, causing NatWest shares to drop about 5% to 295p. This significant change has raised 30-day implied volatility by over 25%, creating a clear opportunity for investors. The market is overly focused on the delayed buyback instead of the long-term benefits of the acquisition.
This rise in volatility makes selling out-of-the-money puts appealing in the coming weeks. For instance, by selling a March 280p put, we can collect a high premium due to current market fear. This strategy works as long as the share price doesn’t fall too much by expiration.
Last year, we saw a similar pattern with HSBC’s Hang Seng deal in October 2025. The initial reaction was a drop of nearly 4%, but the stock later rallied over 15% in the next three months. The market eventually recognized the value of long-term strategic thinking, and we expect NatWest to experience a similar outcome.
This acquisition is a smart strategy to diversify revenue away from traditional lending, which is vulnerable to changes in interest rates. By adding Evelyn’s £65 billion in assets, NatWest significantly strengthens its wealth management sector and fee-generating income. Leading banks have set price targets well above 350p, showing that the market understands the long-term potential here.
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