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UK Treasury sells NatWest stake but still owns more than a third

22nd May 2023 11:00

(Alliance News) - Analysts were unsurprised after UK Government Investments Ltd said on Monday it sold GBP1.26 billion in NatWest Group PLC shares back to NatWest.

The UK government said it sold 469.2 million shares, priced at 268.4 pence each, back to the Edinburgh, Scotland-based lender as part of a buyback agreement first put in place with NatWest back in 2019. The sale was worth GBP1.26 billion in total.

As a result, the UK taxpayer's stake in NatWest will fall to 38.6% from 41.4%. This also marks that the government has halved its holding from peak ownership of 84% at one point.

"UKGI and HM Treasury will keep other disposal options under active consideration, including by way of accelerated bookbuilds, when market conditions permit," the UK government added.

However, Russ Mould, AJ Bell investment director, said "there continues to be a big overhang for the stock, which is likely to remain the case for some time given the slow pace of selling down."

"After all, it's been 15 years since the bank was bailed out by the government and the latter still owns more than a third of the company."

The UK government first began building a majority stake in the bank from October 2008 during the financial crisis. The taxpayer ended up holding an 81% stake in the lender - called Royal Bank of Scotland Group PLC at the time - after a hefty GBP45.5 billion taxpayer bailout. This has been steadily reduced since.

Shore Capital's Gary Greenwood said the transaction was "anticipated", and therefore left its forecasts unchanged.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: "the change doesn't fundamentally change much about NatWest, other than giving it a little more flexibility over the capital base."

However, she noted that "the broader change is a symbolic one."

"Removing government stabilisers is a clear marker of the bank entering a new chapter," Lund-Yates explained.

Victoria Scholar, head of investment at interactive investor, took a different perspective, noting that NatWest shares have "struggled" this year, as the bank has been caught up in the banking sector turmoil with the collapse of Silicon Valley Bank and the rescue deal for Credit Suisse Group AG.

Shares in NatWest were up 1.3% to 271.90 pence each in London on Monday morning; the bank has a market capitalisation of GBP25.74 billion. In the last 12-months, the stock has rose by 16%.

Scholar said that with shares recently edging higher, "the government clearly decided that now is a good moment to sell some shares."

Shore Capital reiterated its 'buy' recommendation, with a target price of 268p.

By Sophie Rose, Alliance News reporter

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