Treasury stake in NatWest falls to 11.4% on £1bn shares buyback

NatWest has now bought back £2.2bn of shares in 2024, representing 7.66% of share capital, as the government ramps up its exit from the bank as part of plans to reduce taxpayers’ stake which was 84% after it stepped in to rescue Royal Bank of Scotland at the height of the global financial crisis in 2008.

'NatWest does have some real momentum behind it'

The government’s shareholding has reduced by more than two-thirds in 2024 from about 38% in December 2023.

In July, its stake in NatWest dropped below 20% for the first time since its 2008 nationalisation. The Treasury has gradually reduced its equity holding in the lender, which also owns private bank and wealth manager Coutts, Ulster Bank and Lombard.

Paul Thwaite, chief executive of NatWest, said: “As a result of NatWest Group’s continued strong performance, we are pleased to have today completed our second buyback of government shares of 2024, further reducing HM Treasury’s shareholding.

“This transaction represents another important milestone on the path to full privatisation. We believe it is a positive use of capital for the bank and for our shareholders, and we are pleased with the sustained momentum in reducing HM Treasury’s stake in NatWest Group throughout this year.”

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NatWest has been able to accelerate the share sale plan following changes to listing earlier this year, which removed the 5% cap on the amount of stock that could be bought back in a year.

The new Labour UK Government also abandoned plans under the previous Conservative government for a share sale to the public after winning the General Election in July, which the previous government had put forward to create a “new generation of retail investors”.

Former chancellor Jeremy Hunt had hoped that a new generation of retail investors could buying some of the government’s remaining shareholding in NatWest.

Channelling Margaret Thatcher’s privatisations of big businesses like British Telecom and British Airways in the 1980s – which led to million Britons becoming shareholders for the first time – Mr Hunt pointed to the high-profile “If you see Sid, tell him” campaign, that saw about 1.5 million Britons buy British Gas shares.

However, in July, new Chancellor Rachel Reeves scrapped those plans. She said the government still intended to fully exit its shareholding in NatWest by 2025-26, but that a retail share offer would mean having to offer the public discounts worth hundreds of millions of pounds and would not represent value for money for the taxpayer.

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NatWest had spent £24 million on the aborted campaign, with TV ads featuring Sir Trevor McDonald.

At Shore Capital, analyst Gary Greenwood commented: “This directed share buyback has come a little sooner than we expected and so brings forward the likely point at which the government will have fully exited its shareholding – we assume it will be all out by the middle of next year, or possibly sooner.

“The financial impact is to reduce both the share count and Common Equity Tier 1 (CET1) ratio, which we now expect to end the current financial year around the bottom end of the group’s 13-14% guidance range.”

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Last month, the owner of Royal Bank of Scotland reported an operating profit before tax of £1.67bn for the third quarter, up from £1.3bn last year, as growing confidence in the economy underpinned growth in lending for mortgages and to business, with deposits and investments rising. It also raised its profit guidance for the full year.

Mr Thwaite declared at the time that the UK economy has “undoubtedly performed better than many expected” at the start of year, with inflation now below target, interest rates beginning to decrease, and unemployment low, sparking customer activity.