(Bloomberg) — The UK government is stepping up preparations to sell shares in NatWest Group Plc amid growing hopes it will be able to cut the taxpayer-owned stake to a negligible amount by the end of the year, according to several people familiar with the matter.
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The government’s plans to sell shares to the public and to institutional investors as well as the bank buying back its own stock from the UK could mean its ownership of NatWest will fall well below 10% this year, the people said, asking not to be identified discussing non-public information. The wind down would also be helped by the government’s accelerated sale of shares on the open market.
Whittling the stake down below 10% this year would be a lower level than was initially hoped for when Chancellor Jeremy Hunt announced plans for the retail offer in November, the people said. With an £8.1 billion stake that amounts to 28.9% of the company, the government is currently NatWest’s biggest shareholder and it has previously said it would dispose of its entire holding by 2026.
“The government will make a decision about launching a retail offering of NatWest shares in due course – no final decisions have yet been taken,” a spokesperson for the Treasury said in an emailed statement. A NatWest representative declined to comment.
The Treasury remains NatWest’s biggest shareholder after its £46 billion bailout of what was then Royal Bank of Scotland, though it is no longer considered a controlling shareholder after its ownership of the bank dropped below 30% in March.
Intense Work
The government’s stake could shrink to 17% by mid-July through the Treasury’s ongoing incremental sales of shares in addition to a potential directed buyback from NatWest, according to Jason Napier, an analyst at UBS Group AG. Trimming its holdings down to a 10% stake would require a sale of stock worth about £2 billion, Napier said.
UK Government Investments — the state-owned body which is responsible for managing the government’s stakes in publicly-owned businesses — is working intensively on the planned retail offer, the people familiar with the matter said.
That sale will be accompanied by a broad marketing campaign to entice the public into participating in the sale and to make the case for broader share ownership among British citizens, they said.
One idea the government is considering is offering a bonus share for every ten kept for a year — which would create a pool of stock that would not have to be sold now, several people familiar with the matter said.
While UKGI is rushing to complete preparations for a sale, a decision on whether or not to go ahead would be taken by Hunt and Prime Minister Rishi Sunak and that determination has not yet been made, one of the people said. One major factor in their decision will be the timing of the general election campaign.
There is speculation that the decision will be made in the next few weeks with an aim of kicking off the marketing campaign in June. The month is seen as a strategic window to hit if possible as NatWest may not be able to issue a prospectus in July because it is scheduled to publish half-year results on July 26. August would not be favored as it is traditionally quiet, with many in the City away on holiday.
Shares of NatWest have surged 46% this year, making the company the best-performing bank stock in the FTSE All-Share Banks Index.
While that development has been welcomed by those working on the share sale, it’s also complicating efforts with setting the discount the government would offer, especially to retail investors.
Already, though, the bank’s efforts to boost returns and the government’s announcement about its intention to shed its stake has attracted new investors. One notable one is Los Angeles-based Capital Group, one of the world’s largest active asset managers, which has amassed a stake in NatWest valued at £9 million, according to data compiled by Bloomberg.
That’s given UK officials confidence that this year’s share sales will be different from when the government sold £2.5 billion of the stock in 2018. At that time, Norway’s Norges Bank was the only long-only investor featured in the top ten buyers. Hedge funds made up the remaining large buyers.
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