After weeks of banking turbulence that hurt the lender’s shares and briefly raised concerns about a new financial crisis, a plan to reduce the government’s stake in NatWest has been prolonged by another two years, Entrepreneurng report.
Following NatWest’s over £46 billion state rescue in 2008, UK Government Investments (UKGI), which manages the shares for the Treasury, said that the plan to strategically sell some of the British taxpayer’s investment would now last until August 2025.
The initial one-year trading plan, announced in the middle of 2021, called for selling up to 15% of the shares by drip-feeding them back into the private market. It was later extended to the middle of this year’s August.
Over that time, the government’s ownership of NatWest Group, originally the Royal Bank of Scotland Group, has decreased from 54.7% to 41.5%.
There are still concerns about whether the government will be able to complete the bank’s full privatization by 2026, or about 18 years after the state-sponsored bailout it received during the height of the 2008 financial crisis.
The purpose of prolonging the trading strategy was left unstated by the administration. The decision was made, nevertheless, at a time when significant bank equities are experiencing volatility, including those of NatWest, which was hurt by the market panic last month that led to the demise of Silicon Valley Bank and the subsequent emergency buyout of Credit Suisse by its regional rival UBS.
Shares of NatWest have fallen more than 10% over the past month due to the recent volatility in the banking sector, according to Victoria Scholar, head of investment at interactive investor. “This makes things more difficult for the government, which is trying to sell its investment at a time when investors are wary of the industry.
“Opportunistic purchasers may return to the market and purchase shares of NatWest and other companies at a discount if the banking sector crisis subsides during the upcoming weeks. Nonetheless, banks may experience increased selling pressure if other systemic flaws are discovered, she said.”
The lender will be entirely privatized by 2026, according to the government’s most recent budget. The government’s ownership percentage exceeded 80% at one point. In 2015, it began offering NatWest shares to the public again.
The time is twice as long as it took the government to sell its stake in Lloyds Banking Group, which was given a £20.3 billion bailout after purchasing HBOS as part of a government-organized rescue plan at the height of the financial crisis. In 2017, Lloyds repurchased the final of its government-owned shares.
In conclusion, UKGI stated that it would be open to additional sell-off strategies for NatWest shares, such as share buybacks, but only if it could “create value for taxpayers.
Source: The Guardian
