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NatWest nudges closer to private ownership with government share sale

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TL;DR Breakdown

  • The British Government is selling £1.26bn worth of its stake in NatWest, reducing its share to under 40%.
  • Despite lower-than-paid share prices and market uncertainties, the bank is on track for full privatization by 2025-26.
  • The sale represents a significant milestone in NatWest’s journey to profitability since its bailout during the 2008 financial crisis.

The British Government is set to sell £1.26bn ($1.6bn) worth of its stake in NatWest, bringing the state’s bank ownership to under 40%. This strategic move brings the lender closer to full private ownership, a journey that began in earnest with its £46bn bailout during the 2008 financial crisis.

This latest sale will cut the state’s stake in the lender to 38.6%, down from the previous 41.4%. City Minister Andrew Griffith confirmed this sale as a significant milestone toward the bank’s full privatization. “The government has now sold well over half of its shareholding,” Griffith noted.

Strategic move amid market uncertainty

Despite the shares selling at a price well below what the government paid in 2008 (268.4p versus 502p), this development indicates NatWest’s journey back to profitability. The sale comes against a backdrop of the lender reporting stronger-than-expected profits in recent quarters, aided by the Bank of England’s interest rate hikes to curb inflation.

However, uncertainty due to market fluctuations and recent failures in the industry have impacted the share price. NatWest Chair Howard Davies attributed the less-than-ideal share price to the current valuation of banks. “One would have hoped the share price would have been even stronger, but that’s how banks are valued at the moment,” he said.

Nonetheless, the bank remains resilient, with shares trading steady at 270.30p. The recent boost in profits, combined with the government’s continued stake sale, keeps NatWest on track for its projected full privatization by 2025-26, a move which is, of course, subject to prevailing market conditions.

NatWest’s Group Chief Executive Alison Rose echoed this optimism, stating that the transaction demonstrated “positive progress on the bank’s strategic priorities and the path to privatization.”

The British Government’s share sale is part of an ongoing strategy to sell its stake over time at market prices gradually. According to the UK Government Investments, the deadline for this trading plan has been extended by two years to August 11, 2025.

This continued reduction of government ownership amidst a history of market volatility illustrates the positive trajectory for NatWest. Despite a challenging industry landscape, the bank’s strategic moves and robust performance underpin its drive toward full privatization.

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