NatWest Group Plummets 2.5%—What’s Driving the Selloff?

• Goldman Sachs downgrades NWG to 585p, citing softening product margins
• UBS reaffirms 'Buy' with 553p target, highlighting robust cash flows
• Shares trade at 13.29, down 2.46% on the day—within 13.21–13.32 intraday range
• Dynamic PE ratio of 8.33 suggests undervaluation amid sector outperformance

NatWest’s midday slump contrasts with the broader Diversified Banks sector’s 0.63% gain, raising questions about the catalyst for the dip. Analysts highlight a mix of margin concerns and sector-specific dynamics, while technicals suggest near-term support at 13.12.

Goldman Sachs Downgrade Drives the Drop
The primary catalyst for NatWest’s decline is Goldman Sachs’ price target cut to 585p from 593p, maintaining a 'Buy' rating but signaling caution around margin pressures. Analysts noted softening product spreads and deposit competition in Q2, which could offset rate-hedge benefits. This contrasts with UBS’s bullish stance, which emphasized strong free cash flow and equity returns. The downgrade underscores a bifurcated view on near-term profitability, with investors pricing in margin headwinds ahead of Q3 earnings season.

Bank Sector Outperforms, But NatWest Trails Peers
While the Diversified Banks sector has gained 14.38% YTD, NatWest’s 2.46% intraday loss highlights its divergence from peers like JPMorgan (+20.3%) and Toronto-Dominion (+38%). The sector’s resilience is fueled by robust NII growth and capital returns, but NatWest’s margin concerns and single-digit P/E ratio mark it as a value outlier. Investors may be rotating toward higher-margin players like Citigroup (C) or RBC, which have outperformed on balance-sheet flexibility.

Bullish Puts and Technical Support Signal Opportunities
Bollinger Bands: Current price hovers near the lower band (13.12), signaling oversold conditions.
RSI: 42.21—below neutral 50, suggesting further downside may be limited.
MACD: Negative histogram (-0.0646), reflecting bearish momentum.

Key Levels: Buy the dip at 13.12 (lower Bollinger), target 13.80 (middle band). Short sellers should watch 14.16 resistance for profit-taking.

Top Option Picks:
1. NWG20250815P15 (Put, Strike 15.00):
- Delta: -0.775 (high downside sensitivity)
- Theta: -0.0044 (slow time decay)
- Gamma: 0.1552 (strong price responsiveness)
- Turnover: 6,503 (high liquidity)
- Why? The deep OTM put offers 3.23% upside in a 5% downside scenario, with volatility tailwinds.

2. NWG20250815C12.5 (Call, Strike 12.50):
- Delta: 0.703 (strong upside bias)
- Theta: -0.0080 (moderate decay)
- Gamma: 0.1981 (price leverage)
- Turnover: 570 (active trading)
- Why? A 5% rebound to 13.95 would yield 8.8% gains, ideal for bouncing from oversold levels.

Hook: Aggressive bears: NWG20250815P15 plays the margin-driven pullback; bulls: NWG20250815C12.5 captures a sector rebound.

Backtest Natwest Group Stock Performance
The backtest of NWG's performance after an intraday plunge of -2% shows favorable short-to-medium-term gains. The 3-Day win rate is 57.38%, the 10-Day win rate is 59.59%, and the 30-Day win rate is 64.58%. Although the maximum return during the backtest period is only 3.46%, the overall trend indicates that NWG tends to recover and even exceed its pre-plunge levels in the following days.

Hold the Line or Fade the Drop? NatWest’s Crossroads
NatWest’s dip presents a crossroads: Is this a buying opportunity at depressed valuations, or a warning sign of margin fatigue? Technicals suggest 13.12 offers a solid support floor, while sector peers like JPMorgan (+20.3% YTD) highlight the upside potential of resilient banks. Investors should monitor Q3 earnings (Lloyds kicks off on July 24) for clarity on margin trends and UBS’s 'Buy' thesis. For now, the options market is pricing in volatility—aggressive traders can dip toes in with puts/puts, while long-term holders should wait for a clear breakout above 14.16 resistance. Action Alert: Below 13.12, consider adding puts; above 14.00, pivot to calls.