National Westminster will be in the spotlight first thing tomorrow after it announced late on Friday that it had discovered mispricing

National Westminster will be in the spotlight first thing tomorrow after it announced late on Friday that it had discovered "mispricing errors" at its investment banking arm that will require a pounds 50m charge. Investors are unlikely to make significant changes to portfolios until they have analysed earnings reports from some of the country's biggest companies, including HSBC, BAT, General Accident, Glaxo Wellcome, Cadbury Schweppes, Royal & Sun Alliance and GKN.Concern that Wall Street will extend last week's disappointing performance will also encourage investors to move cautiously, if at all.Much of the blame for the unease lies with US Federal Reserve chairman Alan Greenspan, who suggested last week that the Fed might raise interest rates. That could give the Bank of England leeway to raise rates without battering already beleaguered manufacturers and exporters.Higher rates increase the cost of borrowing money, slowing corporate growth and making fixed income investments, such as bonds, relatively more attractive than equities.Lower bond prices - the 10-year gilt tumbled 18/32 on Friday, wiping more than 70 pence off the value of a pounds 100 bond - could add to the market's woes, weighing on the shares of financial companies, which typically have large bond portfolios.But not everyone is sure the UK market is set to fall, even if the Fed and the Bank of England begin to raise rates."We are in a benign inflation environment that is very healthy for the equity markets," said Mark Thompson, a fund manager at AXA Equity & Law Investment Management. But concern also stems from renewed doubts about the single currency starting on time, which is likely to spur German mark buying and could pull down other European currencies, including the pound. But NatWest was weak on the results and the shares continue to droop. Or it can concentrate on share buybacks.Bank shares have been on a remarkable rally in recent months. It will be a smart trick if it can pull it off - few banks succeed.So where does that leave the shares? With excess capital pouring out of its ears, it can afford another big deal.

So is life insurance an essential ingredient, or will it be discarded? NatWest may have aspirations as a "bancassurance" player, but caution seems to be the word.Caution was also emphasised by Lord Alexander, the chairman, who said the group will refuse to get caught again by the boom-bust of the lending cycle. This begs the question of how important a life business is to long-term strategy NatWest's own life operation is still tiny. And it bought Gartmore for its expertise in fund management. Yet it pulled out of the bidding for Scottish Amicable, saying the price was too high. In London it paid top dollar for Hambro Magan, the corporate finance boutique. It has expanded its presence in US investment banking with the purchase of Gleacher. Its core retail banking business presented a respectable picture at the results, but the group lags behind Lloyds TSB, Barclays and HSBC.

But this should not detract from the underlying investment case for NatWest - which is where the real problem lies The group remains an enigma to many in the City. Martin Owen, the preternaturally calm chief executive of NatWest Markets, the whizzy investment banker, must be ruing a comment he made only five days ago, at the time of the annual results: "We now have an organic strategy, particularly in our equity derivatives business." Oops! Not quite there yet, Martin: a rogue trader in the sterling futures unit has since been revealed to have dropped pounds 50m. Given the way it has delivered to date, the shares remain a sound long-term buy.RICHARD PHILLIPS. But given the similarity of the new business to existing operations, management should be given the benefit of the doubt.Chief executive Peter Redfern made no bones about his intentions to expand the business when the company first floated. This leaves the shares on a p/e ratio of 15 times current year earnings, declining to a less demanding 12 times in 1998.Investors may be concerned that this is the second sizeable rights issue in a short space of time; the company did a pounds 42m rights last June to buy Serck Marston, the country's largest producer of engine radiators. Sales should hit pounds 400m in 1997, rising to pounds 475m in 1998, to create pre-tax profits of up to pounds 24m and pounds 32m respectively. Partco reckons it will have a 4 per cent market share after the deal, in what remains a highly fragmented market.