NatWest Agrees to Share Buyback, Moves Closer to Full Privatization
British state-supported banking institution, NatWest, has committed to purchase its shares worth $1.6 billion or 1.3 billion pounds from the government. This step signifies NatWest's gradual transition to complete private ownership 15 years after the financial support it received during the global financial crisis.
U.K. Government Reduces Stake in NatWest
The recent deal will lessen the government's stake in the erstwhile Royal Bank of Scotland to 38.69% from 41.4%. After a similar block sale, NatWest returned to majority private ownership in March 2022, with the U.K. government aiming to achieve full private ownership by 2026.
Positive Market Response and Government's View on Privatization
The announcement resulted in a 0.9% rise in NatWest shares in early trading. "Today's sale is another major milestone in returning NatWest to full private ownership as promised," stated Andrew Griffith, the economic secretary to the Treasury.
Share Purchase Price and Taxpayer Concerns
NatWest has agreed to buy the shares at 268.4 pence per share, indicating a continued loss for taxpayers. 2008 the bank was rescued with a 45 billion pounds bailout for 502 pence per share.
Banking Sector Challenges and Recent Stock Performance
The banking sector has faced hurdles due to the failure of several U.S. regional lenders and the emergency acquisition of Credit Suisse. However, despite the industry turmoil, banking shares have recovered, with NatWest's shares recording a 15% rise compared to last year.
Continued Government Efforts for Privatization and Analyst View
The U.K.'s finance ministry extended a trading plan in April, allowing smaller sales to investors over two years, as it aimed for privatization progress despite the period of volatility. Analysts at Shore Capital maintain that the transaction, reducing NatWest's core capital ratio to approximately 14.4%, was expected, and their forecasts remain unchanged.
NatWest's Strategic Priorities Towards Privatization
"This transaction reduces government ownership below 40% and demonstrates positive progress on the bank's strategic priorities and the path to privatization," NatWest CEO Alison Rose said in a statement. This recent development marks the government's sixth block sale of NatWest stock, with peak government ownership at 84% in 2008.