Time's Up: NatWest Bites the Bullet and Exits Government Clutches
Financial institution NatWest shifts back to being privately owned
After a tiring, decade-long tale, finance's most nerdy soap opera comes to an end as NatWest slips out of the government's grasp, once and for all. The government's dwindling 0.26% stake in the banking titan sold off on Friday, bringing closure to a drama that traces back to the 2008 financial crisis.
Way back when Natwest, formerly known as the Royal Bank of Scotland, needed a mighty £46bn life raft thrown by the taxpayer as it battled for future survival. In return, the almighty government scooped up an 80% stake in Natwest as part of the rescue scheme.
Naturally, Natwest wasn't the only chum bailed out; Lloyds received a£20bn lifeline for a 43% stake. Over the years, the government rode a seesaw of fees, dividends, and profits, pocketing a whopping £10.5bn loss since the bank was saved from the brink of collapse.
Fast forward to today, with Natwest saying farewell to its public welfare days and stepping ahead with confidence. As Paul Thwaite, Natwest's CEO, puts it, "Bye-bye, 2008! Hello, future! We're stronger, leaner, and more focused on what matters – our customers."
Ready, Unsteady, No! The Accelerated Exodus
From 2022 onward, the taxpayer remained Natwest's primary shareholder. In March 2022, the government shook off a huge chunk of its shares, slashing its stake to 48.1%. The pace quickened over the last year as Uncle Sam decisively sped up the sell-off to liberate Natwest from state shackles.
January 14, 2025, saw a dramatic reduction in the government's stake to 8.9%, thanks to a sale of 86.4 million shares. At the beginning of May, Natwest confirmed that the government's holding had sunk below 1%, plummeting an average of 2% each month since.
Did the government rely heavily on Natwest or watch from a distance? Dan Coatsworth, an investment analyst at AJ Bell, shares his thoughts, "Natwest, just like its UK bank contemporaries, walked the same path since the global financial crisis. One thing's for sure – the government, whether hands-on or not, played an instrumental role in its resurrection."
Patience is a Virtue: The Government's Zen-like Attitude
During its tenure as Natwest's biggest shareholder, the government was viewed as a supportive force, offering a Zen-like patience. Upon reflecting on their relationship with the government, Rick Haythornthwaite, Natwest's chairman, commented, "Through the investing years, the government showed calm and patience, allowing us the space to build a bank that's safer, simpler, and puts our customers first."
The unrelenting financial storm has calmed, and Natwest has reached a decade-high of 478.80p in April. Although this figure pales in comparison to pre-financial crisis heights of 5,236.28p, one can't deny Natwest's resilience in weathering the storm.
The Next Steps? Natwest Sets its Sights on a Deal Spree
Given his bank's steady performance, John Moore, senior investment manager at RBC Brewin Dolphin, suspects Natwest might be eyeing up more exciting ventures. "With some of its peers stepping back from the UK, opportunities for growth could be within reach, making for an intriguing future for Natwest."
Although unsuccessful, rumors circulated that Natwest had aimed to take over Santander UK's retail arm earlier this year. This potential union would have resulted in the biggest banking deal since the financial crisis. While the talks have fizzled out, they hint at Natwest's ambitions post-privatization.
Last year, Natwest set the stage when it gobbled up Sainsbury's banking assets and purchased Metro Bank's residential mortgage portfolio, worth £2.5bn. With Natwest preparing to unveil its half-year results on July 25, the business world waits to see what moves the bank will make in its new, fully private life.
[1] Government Injections of Capital in the Royal Bank of Scotland Group and Lloyds Banking Group[2] UK Government's Sale of Shares in NatWest Group (Formerly RBS)[3] Timeline: The UK Government Sell-off of RBS Stakes[4] Royal Bank of Scotland (RBS) Sell-off Timeline
- The government's sale of shares in NatWest Group, formerly known as the Royal Bank of Scotland, continues at an accelerated pace, with the stake reduced below 1% on average each month since early May.
- Over the years, the financing industry has witnessed NatWest, along with other UK banks, restore their footing in the economy following the global financial crisis, with the government playing a pivotal role in their revival.
- As NatWest steps away from public welfare and toward greater private independence, potential deal sprees could be on the horizon, particularly in light of the competitive landscape created by some banks stepping back from the UK.
- Strategic ventures, such as the acquisitions of Sainsbury's banking assets and Metro Bank's residential mortgage portfolio, highlight NatWest's focus on growth in its new, fully private life, with more exciting opportunities potentially arising in the future.
