UK lender NatWest is set to buy wealth manager Evelyn Partners for 2.7 billion pounds ($3.67 billion) including debt to boost its savings and investment offerings.

Shares in NatWest were down 7% in premarket.

The bank reached an agreement with private equity firms Permira and Warburg Pincus to take over Evelyn Partners, it said Monday. NatWest plans to combine the company and its platform with its existing private banking and wealth management business once the deal closes this summer.

Banks across Europe are increasingly seeking to diversify their revenue sources by bulking up their fee-generating lines of business to reduce reliance on lending income as central banks trim rates. Domestic peer Lloyds Banking Group recently took full ownership of its wealth management and advice joint venture with Schroders.

The transaction will boost NatWest's fee income by around 20% before synergies and increase the bank's exposure to a high-growth and capital-light segment, it said. The deal should generate cost savings of around 100 million pounds per year, it added.

"Although we consider this to be a bolt-on transaction, it would be transformational, filling the gap [NatWest] has in its affluent wealth offering," RBC Capital Markets analyst Benjamin Toms said. The bank has traditionally focused on high net-worth customers with Coutts, the three-century-old private bank which is famed for having counted the late Queen Elizabeth II among its clients.

Under Permira's ownership since 2014, the group that was later rebranded Evelyn Partners has gone from overseeing around 5 billion pounds in client assets to 69 billion pounds at exit through organic growth and acquisitions. In 2020, Evelyn Partners bought Smith & Williamson and brought in Warburg Pincus as a minority investor. The acquisition of Evelyn Partners will more than double NatWest's assets under management and administration to 127 billion pounds.

The deal values Evelyn Partners at 15 times its 2025 earnings of 179 million pounds before interest, taxes, depreciation and amortization. Aggressive integration and cost-cutting will quickly justify the hefty price tag, NatWest Chief Executive Paul Thwaite said.

"This represents a strategically and financially compelling use of capital, enhancing income diversification and strengthening returns in a high‑growth segment, to deliver sustainable long‑term value creation," Thwaite said.

NatWest said it is funding the deal, which should reduce its capital ratio by around 130 basis points, with existing resources. It should be accretive to the bank's growth and return on tangible equity within the first year of ownership and deliver higher returns versus those earned through a buyback, it added.

Jefferies analysts noted that while the strategic rationale is obvious, the financial rationale is arguably less compelling given the hit to earnings per share and tangible net asset value.

The announcement marks NatWest's first major deal since returning to private ownership last year after the U.K. government sold its remaining stake in the bank it bailed out in 2008. The group also announced a 750 million pound share buyback, but said the next program wouldn't come until 2027 due to the acquisition's impact on its capital.