The owner of Royal Bank of Scotland has taken a further step towards a full return to private ownership.

NatWest Group announced this morning that it has bought back 392 million shares from the UK Government, representing 4.5% of its share capital, at a cost of £1.24 billion. The purchase, at 316.2p per share, has reduced the UK taxpayers’ stake in the bank to 22.5%.

The Edinburgh-based institution moved into full public ownership when it was rescued by the UK Government in a £45.5 billion bailout at the height of the financial crisis of 2008 and 2009, giving taxpayers an 82% stake in the lender.

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Over recent years the shareholding has gradually been reduced as the bank has returned to financial strength. The shareholding stood at 45.9% at the end of 2022, but by December 2023 it had fallen to 37.98% through a combination of a daily trading plan and a £1.3bn directed buyback on May 22 last year.

The shareholding was further reduced this year, with the bank announcing today that the Government’s stake is now 22.5% as a result of the ongoing trading plan and directed buyback. It had been brought down 26.95% on May 13.

However, while NatWest chief Paul Thwaite hailed the latest share purchase from the Treasury as “another important milestone”, the UK Government’s plans to launch a retail offer of its shares have been stalled by the general election.

Mr Thwaite, who was named permanent successor to former boss Dame Alison Rose in February 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.

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“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.”

Mr Thwaite had declared in April that returning NatWest to private ownership is a “shared ambition and we believe it is in the best interests of both the bank and all our shareholders” as the lender reported an operating profit of £1.3bn for the first quarter.

New chairman Rick Haythornthwaite said a return to private hands would end a “sorry tale” of government involvement in the institution.

Shares in the bank were trading at 315.4p, down 0.8p or 0.25%, around 3.30pm.