NatWest’s year of reckoning: Bank which was once a basket case faces public sale in 2024

In 2008, it was nearly destroyed by the reckless leadership of Fred ‘the Shred’ Goodwin before being rescued in a £45billion state bail-out.

Sixteen years later, NatWest – today only worth £19billion in total – is about to face another pivotal moment as the Government explores a public sale of part of the big stake it still holds in the lender.

And it will do so with a new chairman and chief executive after boss Alison Rose was forced out over a de-banking scandal involving former Ukip leader Nigel Farage.

As a company that remains 38 per cent-owned by the taxpayer, it also faces an unusual degree of uncertainty from a general election which polls suggest is likely to see Labour propelled into power.

The announcement that members of the public will be able to get their hands on their own slice of the lender came out of the blue during November’s Autumn Statement.

It was billed by Chancellor Jeremy Hunt as a revival of the ‘Tell Sid’ privatisations of the 1980s when retail investors gobbled up shares in the likes of BT and British Gas.

Some taxpayers will no doubt think they have already paid handsomely for the bank through the bail-out during the financial crisis and the austerity policies that followed as Britain emerged from the economic ruins.

Back then, Goodwin’s giant firm, known at the time as Royal Bank of Scotland, was a behemoth – briefly the biggest bank in the world before collapsing under the weight of its own rapid expansion.

Today, as a profitable UK-focused lender, which operates under the NatWest, Royal Bank of Scotland and Ulster Bank brands, it looks very different. 

But, as one analyst said, the firm must make sure it ‘doesn’t make any more big mistakes’. For a bank whose recent history is littered with disasters that may be easier said than done.

Its recovery since the bail-out has been gruelling as chief executives Stephen Hester and then Ross McEwan grappled to turn around its fortunes and enable the Government to reduce its 82 per cent stake in the lender.

But the dream of returning RBS to private hands was repeatedly delayed as it was battered by a series of scandals – some of them in common with other banks – such as the mis-selling of payment protection insurance and complex interest rate swap products.

Over nine years it piled up annual losses totalling £58billion.

That was largely because, even as much of the business was making money, the bank was paying the price of the mistakes of the past.

Tens of billions of pounds were set aside for restructuring as it slashed tens of thousands of jobs, wound down its overseas empire and sold off its non- core businesses such as Direct Line and the payments processor Worldpay.

Further big sums covered the cost of loans that turned sour and US fines over its behaviour in the run-up to the 2008 financial meltdown.

Finally, RBS made a profit in 2017. Two years later McEwan stepped down to be replaced by Alison Rose.

The first female boss of one of the UK’s big four banks, Rose wasted little time in trying to shake off its troubled history by renaming it as NatWest. 

At first she seemed like a breath of fresh air, guiding the lender through the Covid crisis and overseeing a watershed moment as the Government reduced its stake to less than 50 per cent.

Profits were increasing, helped by rising interest rates.

But it all changed when Coutts, which is one of the group’s lesser known brands, found itself having to answer questions about why it had closed Farage’s account.

When it emerged that Rose had briefed a BBC journalist with inaccurate information about his finances, she was forced to quit.

Chairman Howard Davies is on his way too, to be replaced by Rick Haythornthwaite, a City veteran whose former roles include chairman of Mastercard and Network Rail.

Haythornthwaite will be charged with finding a successor to Rose to lead it through a pivotal period as the Government seeks to rid itself of its final stake in the bank by 2025-26.

For now, NatWest is being led by Paul Thwaite, an affable Everton-supporting former leader of its commercial and institutional banking business, for an ‘initial’ 12-month period.

‘Credible’ names to take the job on a permanent basis include Ewen Stevenson – previously a chief financial officer at RBS – and HSBC UK boss Ian Stuart, according to John Cronin, who is a banking analyst at the broker Goodbody.

They will once again have to navigate not just the challenge of running one of Britain’s biggest banks but also the politics of the Treasury.

The Government said in November that it will be exploring its options ‘to launch a share sale to retail investors in the next 12 months’.

But that is ‘subject to supportive market conditions and achieving value for money’.

The latter looks like it may be hard to achieve – given that the bank’s shares are worth less than half of the £5 per share price at which the Government bought in.

In the context of the gargantuan challenges of the past, however, NatWest looks in good shape, according to Shore Capital analyst Gary Greenwood when asked if 2024 would be a big year for it.

‘It is now a profitable bank with a strong balance sheet – and on a largely stable footing,’ he said.

‘I think the eight years post-2008 when it was consistently loss-making, while trying to restructure its balance sheet and rebuild its capital position, were much bigger.’

Greenwood does not expect to see any major changes under its new boss.

‘It’s really about sustaining a good level of profitability in a difficult environment, servicing customers well and making sure it doesn’t make any more big mistakes,’ he said.