UK extends plan to sell off its shares in NatWest by another two years

A plan to whittle down the government’s stake in NatWest has been extended by another two years after weeks of banking turmoil that hit the lender’s shares and temporarily fuelled fears over a fresh financial crisis.

UK Government Investments (UKGI), which manages the shares on behalf of the Treasury, said the scheme to strategically sell portions of the British taxpayer’s shareholding – after NatWest’s near-£46bn state bailout in 2008 – would now run until August 2025.

The original one-year trading plan, unveiled in mid-2021, was meant to offload up to 15% of the shares by drip-feeding them back into the private market, before being extended to mid-August this year.

The government’s stake in NatWest Group – formerly known as the Royal Bank of Scotland Group – has fallen from 54.7% to 41.5% over that period.

There are still questions over whether the government can meet its self-imposed deadline to fully privatise the bank by 2026, roughly 18 years after its state-sponsored rescue at the height of the 2008 financial crisis.

The government did not explain why it was extending the trading plan. However, the move comes amid a turbulent period for stocks of large banks, including NatWest, which suffered from last month’s market panic that triggered the collapse of Silicon Valley Bank, and later the emergency takeover of Credit Suisse by its local rival UBS.

“The recent banking sector turmoil has sent shares in NatWest down by more than 10% over the past month,”said Victoria Scholar, head of investment at interactive investor. “This complicates the picture for the government which is trying to offload its stake at a time when investors are feeling nervous towards the sector.

“If the banking sector crisis fades over the coming weeks, we could see opportunistic buyers return to the market, picking up shares in NatWest and others at a discounted price. However, if further cracks in the system are revealed, banks could come under renewed selling pressure,” she said.

The government said in its most recent budget that it plans to fully re-privatise the lender by 2026. At one point the government’s stake totalled more than 80%. It started selling NatWest shares back to the private sector in 2015.

The timeframe is twice as long as it took for the government to offload its holding in Lloyds Banking Group, which bought HBOS in a government-orchestrated rescue plan at the height of the financial crisis and was subsequently handed a £20.3bn bailout. Lloyds bought back the last of its shares from the government in 2017.

UKGI said it would continue to be open to other methods of further offloading shares in NatWest, including through share buybacks, but only if it was able to “achieve value for money for taxpayers”.

NatWest declined to comment.