Life comes at you quickly if you are the person responsible for maintaining the shareholder register at NatWest.
Until last week, the bank was expected to be at the center of Jeremy Huntof plans to get millions more Britons to invest in the stock market.
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The chancellor first said last year that he hoped a new generation of retail investors could “engage with the public markets” by buying some or all of the government’s remaining stake in NatWest.
With a nod to Margaret Thatcher’s successful privatizations in the late 1980s – which saw more than 10 million Britons become shareholders for the first time through stakes in companies such as British Telecom, British Airways and Rolls – Royce – the chancellor summoned the spirit of “If you see Sid, tell him” advertising campaign which, in autumn 1986, convinced more than 1.5 million Britons to buy shares in British Gas.
He told MPs in November: “It’s time to get Sid investing again.”
These plans now was destroyed by the unexpectedly early general election and the retail offer was formally shelved last weekend.
Determined to return to private property
But today has brought evidence that the government remains determined to return NatWest to private ownership.
It announced it had sold £1.24 billion worth of shares in the lender to NatWest itself – reducing its stake from almost 26% to 22.5% in the process.
This share, at its peak, was almost 84% after Gordon BrownThe UK government was forced to rescue the lender – then called Royal Bank of Scotland – in 2008 at the height of the global financial crisis.
The government reduced its shareholding to less than 30% – which is considered controlling – with sale to institutional investors in March this year.
The latest sale, carried out off-market, was at a price of 316 cents per share – a smidge below NatWest’s closing price of 316.2 cents on Thursday evening. It is NatWest’s fourth government share buyback since 2021.
‘Important milestone’
Paul Thwaite, chief executive of NatWest, said: “This transaction represents another important milestone for the NatWest Group, building on the recent momentum in reducing HM Treasury’s stake in the bank.
“We believe it is a positive use of capital for the bank and our shareholders and represents further progress against the ambition to return the NatWest Group to full private ownership.
“Our focus remains on serving our customers, which in turn will serve our shareholders and the UK economy.”
There are some observations to be made here.
The first is that, however attractive it would be to get a new generation of retail shareholders to invest in the UK stock market, selling the government’s stake in NatWest in this way would provide better value for money for taxpayers.
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This is because the government would have been forced to sell its NatWest shares at a significant discount to the prevailing market price, to encourage retail investors to pay up.
He probably would have also offered other incentives, such as bonus shares to shareholders who maintained their holdings for a year, to prevent these investors from “staggering” the issuance, in other words, buying the shares at a discount and then immediately selling them to make a modest profit.
Probably a shareholder for years, but more sales in the coming weeks
The second observation is that the government – whoever wins the general election – is likely to remain a shareholder in NatWest for some time.
While a retail share offering may not have necessarily represented good value for taxpayers, it certainly would have accelerated the bank’s full return to private ownership. Hunt has promised to return NatWest to full private ownership by the end of 2026.
And the third is that this latest measure does not prevent new share sales in the coming weeks.
The Treasury has used three ways to reduce its participation.
One of them is through direct sales to NatWest itself. This is unlikely to happen again for some time as it needs to be approved by NatWest shareholders – and the most recent authorization has just been fulfilled by the latest purchase.
The second is through the sale of large portions of the government stake to shareholders – which requires the approval of ministers and is therefore unlikely during the election campaign.
The third is through the Treasury’s existing sales plan, under which small amounts of shares are released to the market, which is probably the way forward for now.
The government’s exit via this latter route will undoubtedly be helped by the recovery in NatWest shares which, since the beginning of the year, have risen by just over 43%. The lender recently published its best annual results since the rescue of the old RBS.
What does Labor think of this?
What is not yet clear is the attitude that a future Labor government might take towards the investment in NatWest.
It was always suspicious when Jeremy Corbyn he was a Labor leader who, had he become Prime Minister, would have retained his shareholding.
Sir Keir Starmeron the other hand, it is assumed that it sympathizes with the sale of the stake, just like the current government.
As Gary Greenwood, banking analyst at investment bank Shore Capital, told clients earlier this week: “If the Labor Party comes to power, as widely anticipated, then such plans [for a retail share offer] will likely be reviewed and possibly changed.
“That said, whoever wins the election will still be looking to reduce and ultimately abandon the government’s stake in NatWest, in our view, so the sale is still likely to go ahead in one form or another.”
Mr Thwaite and his colleagues would undoubtedly like to see NatWest return to private ownership as quickly as possible so that they can continue to manage the bank and restore its fortunes.
It would be helpful to everyone involved if Mr Hunt’s shadow, Rachel Reeves, made it clear what the Labor Party’s position is at the moment.
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