It was almost exactly a year ago that the Treasury trumpeted what it called a “landmark” moment: for the first time since the financial crisis in 2008, NatWest, the formerly shredded Royal Bank of Scotland, was no longer majority-owned by the state. A £1.2bn sale of shares had cut the Treasury’s holding to 48.1%.
A path to a full disposal by 2025-26 – a target the government set itself in 2021 – seemed assured, especially as UK Government Investments (UKGI), which manages the holding, cracked on with the selling and got the stake down to 41.5% in short order. Pandemic fears over losses had passed. It was possible to believe in a happy tale of more shares being sold at gradually higher prices against a backdrop of robust market demand.
Unfortunately, as so often in banking, events have intervened. While NatWest itself has done little wrong in the recent months, aftershocks from Silicon Valley Bank’s collapse and Credit Suisse’s rescue takeover by UBS are still being felt in all banks’ valuations. NatWest was a notch above 300p in the middle of February but has now slipped to 264p.
The difference may not sound enormous but when, like the Treasury, you own almost 4bn shares, 40p equates to £1.8bn in real (public) money. If official bodies, like the Bank of England, believe in the fundamental health and soundness of the UK banking system, they are surely obliged to go slow on the selling at this point. Thus there was a sense of inevitability about UKGI’s announcement on Monday that its trading plan to reduce its stake – otherwise known as a “dribble out” mechanism – is being extended from August this year to August 2025.
It is conceivable, of course, that the sector-wide clouds could clear by the summer, that sentiment could improve and the 2026 deadline for full disposal could come back into focus. And, if the market’s mood improves, there is every reason to think NatWest would rally with the sector; on a price-to-book-value basis, its shares trade roughly in line with the sector these days.
But the wisdom of the Treasury setting a deadline in the first place still looks ropey. Yes, a formal date can concentrate minds; and, yes, the imagined pace was never breakneck since the first sale was made as long ago as 2015. Yet it was always true that the overwhelming priority had to be the achievement of value for the public purse.
Value for money lies in the eye of the beholder, naturally, and can change over time (that first 2015 sale of a 5.4% slug, note, was done at the now attractive-looking price of 330p). Disposal calculations are really ones of timing. Now is not a good moment to be selling, even for a Treasury that has better uses for £10.6bn of capital than letting it sit in NatWest shares.
We all resigned ourselves a long time ago to a loss on the near-£46bn bailout of RBS – the entry price was 502p. But the size of the loss still matters. If delay means the 2026 deadline is missed, so be it.
