In a significant step towards the full privatization of NatWest bank, the UK government has sold another £1 billion worth of shares back to the bank. The transaction, announced on Monday, reduces the government’s stake in the bank from 14.2% to 11.4%. This marks the second such share buyback by NatWest in 2024, as the bank steadily progresses towards private ownership once again.
The Long Road to Privatization
The journey to privatize NatWest, formerly known as Royal Bank of Scotland, began in the aftermath of the 2008 financial crisis. The bank, on the brink of collapse, received a staggering £46 billion bailout from the UK government. This rescue package resulted in the government owning a majority stake in the bank, peaking at around 84%.
Over the years, successive governments have worked to gradually sell off the shares and return NatWest to private hands. The process has been a lengthy one, with the government balancing the need to recoup taxpayer money with the desire to ensure a stable banking sector.
Accelerating the Process
The pace of privatization has picked up significantly in recent years. In 2021, the Conservative government announced a trading plan to sell shares gradually on the open market. This plan alone has raised £8.6 billion to date. Combined with other share sales, the total recouped now exceeds £20 billion.
The £1 billion share buyback announced on Monday was conducted at a price of around £3.81 per share, NatWest’s closing price last Friday. It follows a similar £1 billion buyback earlier in the year, after shareholders authorized the bank to repurchase up to 15% of its shares annually from the government.
This transaction represents another important milestone on the path to full privatisation. We believe it is a positive use of capital for the bank and for our shareholders.
– Paul Thwaite, NatWest Chief Executive
Labour’s Approach
The privatization process has continued under the new Labour government, which came to power in July 2024. However, there have been some strategic shifts. Most notably, plans for a high-profile retail share offering, which would have allowed everyday investors to buy shares directly, have been abandoned.
The retail offering, heavily promoted under the previous Conservative government, aimed to echo the “Tell Sid” campaign of the 1980s, which encouraged widespread public participation in the British Gas privatization. NatWest had spent £24 million preparing for the offering before it was scrapped following the Labour election victory.
Instead, the Labour government has indicated it will continue to sell shares through a mix of trading plans and off-market transactions like this latest buyback. The aim is to fully privatize the bank by 2025 or 2026.
The Future of NatWest
As the government’s stake in NatWest continues to shrink, attention is turning to the bank’s future. Under CEO Paul Thwaite, NatWest has been working to reshape itself as a leaner, more focused bank. This has involved shedding legacy issues, streamlining operations, and investing in digital capabilities.
The bank has also benefited from rising interest rates, which have boosted profitability. Shares in NatWest have risen nearly 20% since Labour’s election victory, reflecting investor confidence in the bank’s prospects.
NatWest is a very different bank today than it was during the financial crisis. We have a strong balance sheet, a clear strategy, and a commitment to delivering for our customers and shareholders.
– According to a NatWest spokesperson
Nevertheless, challenges remain. The UK banking sector is intensely competitive, with NatWest facing rivals old and new. The bank will also need to navigate the economic uncertainties posed by Brexit, the pandemic recovery, and the transition to net zero.
As the government continues to sell down its stake, NatWest will face increasing scrutiny from private shareholders. The bank will need to demonstrate that it can deliver sustainable returns and grow its business in a responsible way.
A Symbolic Moment
The latest share sale represents a symbolic moment in the post-financial crisis era. NatWest, once a poster child for the excesses and failures of the banking industry, is gradually returning to private ownership.
For the UK government and taxpayers, the privatization process offers the opportunity to recoup the vast sums invested in the bank’s bailout. For NatWest, it marks the end of an extraordinary chapter and the beginning of a new era as a fully private bank.
As the government’s stake dwindles, the hope is that NatWest can finally put the crisis behind it and focus on serving its customers and supporting the UK economy. The journey is not yet complete, but the destination is coming into view.
