Life comes at you fast if you are the person responsible for maintaining the shareholder register at NatWest.
Until last week, it was hoped that the bank would be at the centre of Jeremy Hunt‘s plans to get millions more Britons investing 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 public markets” by buying some or all of the government’s remaining shareholding in NatWest.
With a nod to Margaret Thatcher’s successful privatisations in the late 1980s – which saw more than 10 million Britons become shareholders for the first time via stakes in businesses like British Telecom, British Airways and Rolls-Royce – the chancellor conjured up the spirit of the “If you see Sid, tell him” advertising campaign that, in autumn 1986, convinced more than 1.5 million Britons to buy shares of British Gas.
He told MPs in November: “It’s time to get Sid investing again.”
Those plans have now been scuppered by the unexpectedly early general election and the retail offer was formally shelved last weekend.
Determined to return to private ownership
Today, though, brought evidence that the government remains determined to return NatWest to private ownership.
It announced it has sold £1.24bn worth of shares in the lender back to NatWest itself – taking its stake down from nearly 26% to 22.5% in the process.
That stake, at its peak, had stood at nearly 84% after Gordon Brown‘s 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 took its stake below 30% – which is deemed to be a controlling shareholding – with a sale to institutional investors in March this year.
The latest sale, carried out off-market, was at a price of 316p-a-share – a smidgen below NatWest’s closing price of 316.2p on Thursday night. It is the fourth such buy-back by NatWest of its shares from the government since 2021.
‘Important milestone’
Paul Thwaite, NatWest’s chief executive, said: “This transaction represents another important milestone for NatWest Group, building on recent momentum in the reduction of HM Treasury’s stake in the bank.
“We believe it is a positive use of capital for the bank and for our shareholders and represents further progress against the ambition to return NatWest Group to full private ownership.
“Our focus remains on delivering for our customers which will, in turn, deliver for our shareholders and the UK economy.”
There are a few observations to make here.
The first is that, attractive as it would have been to get a new generation of retail shareholders investing in the UK stock market, selling down the government’s stake in NatWest in this way delivers better value for money for taxpayers.
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That 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 pony up.
It would also probably have had to have offered other incentives, such as bonus shares for those shareholders retaining their stake for a year, to avoid those investors from ‘stagging’ the issue, in other words, buying the shares at a discount and then selling them immediately to lock in a modest profit.
Likely 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 to come.
While a retail share offer might not necessarily have represented good value to taxpayers, it would certainly have accelerated the bank’s full return to private ownership. Mr Hunt has pledged to return NatWest to full private ownership by the end of 2026.
And a third is that this latest move does not preclude further share sales in coming weeks.
The Treasury has been using three ways to reduce its stake.
One is via direct sales to NatWest itself. This is unlikely to happen again for a while because it needs to be approved by NatWest shareholders – and the most recent authorisation has just been fulfilled by the latest purchase.
The second is via sales of large portions of the government stake to shareholders – which requires a sign-off by ministers and is therefore unlikely during the election campaign.
The third is via the Treasury’s existing sales plan, under which small quantities of stock shares are released into the market, which is probably the way forward for now.
The government’s exit via this latter route will undoubtedly be aided by the rally in NatWest shares which, since the start of the year, are up by just over 43%. The lender recently published its best annual results since the rescue of the old RBS.
What does Labour make of it?
What is not yet clear is the attitude that a future Labour government might take on the stake in NatWest.
It was always suspected when Jeremy Corbyn was Labour leader that, should he become prime minister, he would have retained the shareholding.
Sir Keir Starmer, by contrast, is assumed to be sympathetic to selling down the stake just as the current government is.
As Gary Greenwood, banking analyst at the investment bank Shore Capital, told clients earlier this week: “Should the Labour Party come to power, as widely anticipated, then such plans [for a retail share offer] are likely to be revisited and possibly amended.
“That said, whoever wins the election will still be looking to reduce and ultimately exit the Government’s stake in NatWest, in our view, so the sell down is still likely to continue in one form or another.”
Mr Thwaite and his colleagues would doubtless like to see NatWest returned to private ownership as quickly as possible so they can get on with running the bank and restoring its fortunes.
It would be helpful for all concerned were Mr Hunt’s shadow, Rachel Reeves, to make it clear where Labour stands on the timing of this.