The Government is considering a NatWest share offer to retail investors in the next 12 months, as it looks to offload more of its stake in the bank.
In his Autumn Statement on Wednesday, Chancellor Jeremy Hunt said the move would be ‘subject to supportive market conditions’ and ‘value for money’.
The Government intends to fully exit its stake in NatWest in 2025 to 2026 using a range of disposal methods – and returning NatWest to the private sector through a share offer is one.
In 2008, the Government became the majority shareholder of NatWest when it injected a total of £45.5 billion – about £5 a share – into the stricken lender, then Royal Bank of Scotland, during the height of the financial crisis.
The Government is consdering a NatWest share offer to retail investors in the next 12 months
The Government ended up holding an 84 per cent stake in NatWest after the hefty taxpayer bailout.
In March 2022, the Treasury sold back NatWest shares to the company and stake fell below the 50 per cent threshold for the first time since 2008.
As of May, the Government has held just shy of a 38.7 per cent stake in NatWest, which it reduced through a series of share sales at much lower prices.
‘Banks are deeply out of favour’
Previous sales of the Government’s NatWest shares have only been offered to institutional investors, so this is the first time that retail investors could be given the opportunity to have a slice of ownership.
But experts say that how much the move will benefit retail investors will depend on the price NatWest is sold off at.
The Chancellor said in his Autumn Statement that ‘its time to get Sids investing again’, but the reality is that many investors will have sold or lost their shares in NatWest.
Laith Khalaf, head of investment at AJ Bell says: ‘UK banks are deeply out of favour, because they don’t offer the same growth prospects as exciting companies like Apple and Microsoft, which are the new stockmarket darlings.
‘The banks do offer a decent dividend yield with a relatively stable backing, so income-seekers might well be attracted to a government share sale, especially if it takes place at a discount to the market price.’
‘It’s positive that the Chancellor wants to encourage individual investment, but much will depend on the price that Natwest is sold off at.’
NatWest shares are currently trading at 204.4p. It was as low as 104.3p in September 2020. At its peak in February 2007, the share price was 6,354p.
While Jason Hollands, director of BestInvest says: ‘The challenge here will be achieving this at a price which is value for money for taxpayers, as UK bank shares are currently at very low valuations, with Natwest’s shares currently trading at around 5 times forecast 12-months earnings.’
Susannah Streeter, head of money and markets at Hargreaves Lansdown adds: ‘The bank’s shares are down by almost a third since January, with a sharp fall prompted in October by some disappointing third quarter figures.
‘Markets were expecting a dip in net interest margin as consumers moved from non/low interest-bearing accounts to higher rate longer-term products in search of better returns, but the pace of switching took markets by surprise.’
