The UK taxpayers’ stake in NatWest has been reduced after the government sold £1.1bn of shares in the bank, which was bailed out during the financial crisis more than a decade ago.
The government’s stake in NatWest, formerly known as Royal Bank of Scotland, fell to 59.8% from 61.7% after it sold 591m shares back to the bank at 190.5p a share in an off-market deal authorised by the chancellor, Rishi Sunak, and managed by UK Government Investments.
It marks the third selldown of taxpayer-owned shares since the government injected £45.8bn for an 82% stake in the banking group to bail it out at the height of the financial crisis in 2008.
The Treasury said the latest sale “represents an important step in the government’s plan to return institutions brought into public ownership as a result of the 2007-2008 financial crisis to private ownership”.
However, the sale price represents a loss of about £1.8bn, given the government paid an average of 500p a share in 2008. The government’s remaining stake in NatWest is valued at about £14bn at the bank’s current share price.
The government had planned to sell the entire public stake in NatWest by 2023-24 but was projected to lose about £38.8bn in the process, according to the Office for Budget Responsibility. However, after the impact of the coronavirus pandemic on global financial markets, the Treasury pushed back a deadline to sell the entire stake to March 2025.
The Treasury missed out on a dividend last year as regulators banned payouts to investors by banks when the pandemic hit, in a move to ensure lenders had sufficient capital to weather the economic storm. NatWest has since declared a dividend of 3p a share for 2021, giving the government £225m as its biggest shareholder.
In 2018 the government disposed of a 7.7% stake worth almost £2.6bn to City investors at a loss. The first stake sale came in 2015, when the then chancellor, George Osborne, had to defend a loss of about £1bn.
NatWest said the off-market purchase triggered a £500m contribution to its main pension scheme.
Russ Mould, an investment director at AJ Bell, said: “It’s easy to forget that the government still owns a big stake in NatWest, given it has been 13 years since the bank was first bailed out during the global financial crisis. Even though a big chunk of shares is now heading back to NatWest, it could still be a long time before the bank is able to become a fully privatised business again.”
In contrast, the government sold its last remaining shares in Lloyds Banking Group in 2017, almost a decade after the £20.3bn bailout of the high street lender. At its peak, the government owned 43% of Lloyds.