The UK government will look to raise as much as £3bn-£4bn from selling a chunk of its shares in NatWest bank to the public in a measure expected to be announced by the chancellor in his budget next week.
Jeremy Hunt said in his autumn statement last year that he would “explore options” for a retail offering of part of the state’s remaining one-third share in the bank, now worth about £6.7bn.
The government stake in NatWest is what remains from the 84% holding taken by the taxpayer at the height of the 2008 financial crisis. At the time, the UK government bailed out the bank, then called Royal Bank of Scotland, to the tune of £45.5bn to help save the UK’s financial system from collapse.
It is understood that Treasury officials, after consulting stockbrokers and investment platforms, now believe that multibillion-pound sums can be raised by offering shares to the public.
The chancellor’s plans were given a boost after NatWest this month reported a 20% jump in pre-tax profits to £6.2bn in the year to December 2023, its biggest annual profit since the 2007 financial crisis. Rising interest rates have increased revenues for many banks, as they charged higher rates for loans than those offered on savings products.
The bank also confirmed Paul Thwaite would become NatWest chief executive after his predecessor, Alison Rose, was forced to step down last July after a de-banking row with politician Nigel Farage.
The Treasury has been told there is likely to be appetite from retail investors given that there is £300bn-plus of savings sitting in cash ISAs and other savings accounts.
After the Bank of England began raising interest rates in late 2021, money flowed into higher-paying cash ISAs but interest rates are expected tostart falling again this year, making cash savings less attractive. This could increase investor appetite for NatWest shares if the stocks are priced at a discount.
In his speech last year, Hunt referred to the mass privatisations of the 1980s when shares in British Gas were advertised to members of the public with the “tell Sid” slogan.
Hunt said in November he would look at options for a retail share offer within 12 months but this would be “subject to supportive market conditions and achieving value for money.”
The chancellor told parliament that the potential NatWest sale was part of further capital market reforms aimed at keeping the UK as an attractive centre to start and list a company.
The last major retail share offering by the government was the flotation of Royal Mail in 2013, which attracted about 700,000 retail investors. The government considered offering shares in Lloyds Banking Group, in which it took a stake during 2008, to the public in 2015 but later dropped the plans in 2016. The government exited its holding in Lloyds in 2017.
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This time M&C Saatchi, the advertising agency, has already been hired to create a campaign around the NatWest shares. Other appointments are understood to include Computershare, NatWest’s existing registrar, as “receiving agent” to handle the administration around the offer. The UK government is also in talks with brokers including AJ Bell and Hargreaves Lansdown to help market the shares, in a development first reported by Bloomberg.
It is not clear, however, whether Hunt will use a NatWest offer to simultaneously launch a so-called “Brit Isa”, a proposal to add £5,000 or £10,000 to existing ISAs allowances but only for investment in UK-listed companies. Some broking firms are understood to be lukewarm because of the extra costs of ensuring compliance.
The chief risk to the NatWest share sale is thought to be the price of the shares to be sold. “This is only going to work for the government if the discount to the market price is chunky,” said one adviser.
AJ Bell declined to comment. Hargreaves Lansdown said: “NatWest has generated strong interest from clients and we’d expect this to grow rapidly over the next couple of months,” said Tim Jacobs, head of primary markets at Hargreaves Lansdown. “Given that people can already buy NatWest in the secondary market, the discount offered in the share sale is going to be a major factor in how well the offer gets away.” The Treasury has been contacted for comment.
