NatWest Repurchases £1 Billion of Shares from the UK Government.

NatWest has repurchased £1 billion worth of its shares from the UK government, marking another significant step toward the bank's ongoing privatization. This repurchase follows a decision to abandon plans to sell a portion of the shares to retail investors, a move that highlights the government's successful recovery of its investment in the bank since its 2008 bailout.

As of Monday, both NatWest and the Treasury announced that the government’s stake in the bank will decrease from 14.2% to 11.4%, following the sale of shares priced at £3.81 per share, which was the bank's closing price on Friday. This marks a continued reduction in the government’s shareholding, which has dropped by more than two-thirds in 2024, down from around 38% in December 2023.

The latest sale is part of the broader strategy to fully privatize NatWest, which was previously bailed out with £46 billion during the 2008 financial crisis. The UK government’s initial 84% stake in NatWest was part of efforts to prevent the Royal Bank of Scotland, NatWest’s parent company, from collapsing. Since then, NatWest has regained financial stability, enabling the government to recover a significant portion of the funds through share sales.

Government Recovers Over £20 Billion from Share Divestment

Following the sale, the government has successfully recovered more than £20 billion from the divestment of NatWest shares. This recovery is an important milestone in the Treasury’s ongoing efforts to return the bank to private ownership. NatWest has made a strong recovery since its bailout, with its stock price increasing significantly, enabling the government to offload shares at a profit.

The Treasury had originally considered selling shares to retail investors as part of a wider privatisation effort. A campaign, backed by former Chancellor Jeremy Hunt, was planned to encourage UK citizens to invest in the bank’s stock, reminiscent of the 1980s "Tell Sid" campaign that privatized British Gas. However, this retail sale plan was ultimately scrapped following the announcement of a general election, with the £24 million campaign costs going unused.

In the recent budget announcement under Chancellor Rachel Reeves, the government confirmed it would terminate programs like the retail sale of NatWest shares, focusing instead on divesting the stake through other methods, including direct buybacks and market sales.

NatWest’s Buyback and Future Privatization Plans

Monday’s £1 billion buyback represents the second off-market "directed buy-back" in 2024, after NatWest shareholders approved the bank’s plan to repurchase up to 15% of its shares annually from the government. This move is part of a strategy that aims to reduce the government’s stake in the bank over time, contributing to NatWest’s ongoing privatization process.

NatWest’s strong performance has supported these buybacks, with the bank's shares rising nearly 20% since the Labour party’s election victory in July.

Paul Thwaite, CEO of NatWest, expressed satisfaction with the bank’s progress: “As a result of NatWest group’s continued strong performance, we are pleased to have today completed our second buy-back 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.”

The UK government has already generated £19.1 billion from the sale of NatWest shares, with £8.6 billion of that total raised through a trading strategy implemented in 2021. The government continues to work with its privatization advisers, including Goldman Sachs, Morgan Stanley, and Merrill Lynch, to manage the ongoing share sales and ensure that value is maximized for taxpayers.

Looking Ahead: Full Privatization by 2025 or 2026

The Treasury has indicated that its goal is to fully privatize NatWest by 2025 or 2026, depending on market conditions. As part of this effort, the government will continue to divest its shares through a mix of direct buybacks and market sales, ensuring a balanced approach to maximize returns for taxpayers.

The ongoing share sales and the successful £1 billion buyback underscore the UK government’s commitment to recouping its investment in NatWest while facilitating the bank’s return to full private ownership. This process is not only a financial recovery for the UK taxpayer but also a symbol of the bank's return to financial health following its government-led rescue during the financial crisis.

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