The UK government will accelerate the sell-off of its £12bn stake in NatWest over the next year through a “trading plan” that will return the group to majority private hands for the first time since its bailout during the financial crisis.
The plan will allow the government to gradually sell down its stake at market prices rather than through large bookbuilds that tend to be completed at a discount.
UK Government Investments, which oversees the Treasury’s stake in NatWest, said it had appointed Morgan Stanley to manage the sales, which will start after the expiry of a three-month lock-up period put in place after the last big sale in May.
It did not specify how much of the bank’s stock would be disposed of but said sales would be capped at 15 per cent of the total volume of shares being traded in the market over the duration of the plan.
The Treasury spent £46bn rescuing NatWest, formerly known as Royal Bank of Scotland, after it overexpanded in the 2000s and was caught up in the US subprime mortgage crisis. It restarted reducing its stake in March after a more than two-year gap, and still owns about 55 per cent of the bank.
It said “shares will only be sold at a price that represents value for money for taxpayers”.
The bank’s stock price has risen a quarter since the start of 2021, but remains about 60 per cent lower than the average price the government paid to bail it out, meaning the sales will bring about billions of pounds of losses for taxpayers.
Joseph Dickerson, an analyst at Jefferies, said the structure of the trading plan could allow NatWest to start a share buyback programme. The bank has already pledged to return some of its excess capital to shareholders through dividends, but was previously held back from buying shares in the open market because doing so would have increased the Treasury’s shareholding in percentage terms.
The Bank of England this month lifted restrictions on bank dividends and share buybacks that had been imposed at the height of the coronavirus pandemic, and lenders including NatWest are expected to give more guidance on their capital return plans when they report second-quarter results next week.
The Treasury said it would still be able to consider other options to speed up the disposal during the 12-month trading plan, including accelerated bookbuilds or off-market sales directly back to NatWest.