Treasury sells NatWest stake at a discount to raise £1BN


The government has sold a 5 per cent stake in NatWest, raising £1.1 billion, but had to discount the price by 7 per cent to find buyers in the overnight placing.

UK Government Investments said it had sold 580 million shares at 190p, reducing its stake in the former Royal Bank of Scotland from 59.9 per cent to 54.8 per cent.

The price was a 7 per cent discount to the 204p at which the shares were trading on Monday afternoon just before news of the placing leaked. It was a 4 per cent discount to the closing price on Monday.

The disposal crystallises a loss to taxpayers of about £680 million on the shares sold, with UKGI accepting a price 62 per cent lower than what the government paid for them in the rescue of RBS in 2008.

In the depths of the banking crisis, ministers injected £45.5 billion of fresh capital into RBS after it was hit by steep losses on subprime mortgages and the disastrous acquisition of the Dutch bank ABN Amro.

An initial government stake of more than 83 per cent has been reduced by previous share sales, most recently in March when NatWest itself used spare capital to buy £1.1 billion of government-owned shares in a transaction known as a directed buyback. That was priced at 190.5p.

The latest transaction means the Treasury has sold each of four tranches of shares at a lower price than the previous one. The first was a sale of a 5.4 per cent stake at 370p per share in 2015.

Ian Gordon, a banks analyst at Investec, said the timing of the latest sale was “entirely understandable” because the market price had been trading at its highest for a year. But he said NatWest still faced “a hard slog ahead” and the government had a long way to go to sell its holding completely. He rated the shares a “sell”.

According to Budget documents in March, the Treasury wants to divest the last of its shares in NatWest by March 2026 subject to market conditions and getting good value.

The placing was being handled by Barclays, Citi, Goldman Sachs and Morgan Stanley. UKGI was advised by Rothschild.

Appetite for bank stocks has been poor for some time because of the headwind of low interest rates and worries about Covid-related losses. However, in recent months that has improved. NatWest shares had more than doubled from a September low of 93p. That was in spite of the revelation in March that it was facing criminal proceedings over money laundering allegations.

Today in early trading, NatWest shares were fetching just over 192p.