NatWest Takes Steps Towards Full Private Ownership as Government Sells £1.24bn Stake
The government’s plans to get millions more Britons investing in the stock market through a retail share offer of NatWest have been shelved due to the unexpectedly early general election.
However, the government remains determined to return NatWest to private ownership and has sold £1.24bn worth of shares back to the lender, reducing its stake from 26% to 22.5%.
This marks the fourth such buy-back by NatWest of its shares from the government since 2021.
NatWest’s chief executive, Paul Thwaite, called the transaction “another important milestone” for the bank and a positive use of capital for both shareholders and the UK economy.
The government’s stake in NatWest, which stood at 84% at its peak after the bank’s rescue in 2008, has been steadily decreasing. It was reduced to below 30% earlier this year with a sale to institutional investors in March.
The latest sale was carried out off-market at a price of 316.2p-a-share, the bank’s closing price on Thursday night.
While the government’s plans for a retail share offer would have been attractive in getting a new generation of retail shareholders investing in the UK stock market, this approach delivers better value for taxpayers.
The government would have had to sell its NatWest shares at a significant discount to the market price to encourage retail investors, and may have had to offer additional incentives to prevent investors from ‘stagging’ the issue.
However, the government is likely to remain a shareholder in NatWest for some time as it aims to return the bank to full private ownership by 2026.
The Treasury has been using three ways to reduce its stake – direct sales to NatWest, sales to large shareholders with ministerial approval, and small releases of stock shares into the market.
The government’s exit via the latter route will be aided by the rally in NatWest shares, which are up by over 43% since the start of the year.
It is not yet clear what a future Labour government’s stance will be on the stake in NatWest. While it was expected that former leader Jeremy Corbyn would retain the shareholding, current leader Sir Keir Starmer is assumed to be in favor of selling down the stake.
Banking analyst Gary Greenwood of Shore Capital believes that whoever wins the election will still be looking to reduce and ultimately exit the government’s stake in NatWest.
The bank’s management is eager to see NatWest returned to full private ownership so they can focus on running the bank and restoring its fortunes. It would be beneficial for all parties if Labour’s shadow, Rachel Reeves, clarifies their position on the timing of this process.
