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Taxpayer stake in NatWest was reduced after the government sold £ 1.1 billion of shares in the bank, which was bailed out during the financial crisis more than a decade ago.
The government’s stake in NatWest, formerly known as the Royal Bank of Scotland, fell to 59.8% from 61.7% after it sold 591 million shares to the bank at 190.5 pa shares in a deal off market authorized by Chancellor Rishi Sunak and managed by UK Government Investments (UKGI).
This is the third sale of taxpayer-owned shares since the government injected £ 45.8 billion for an 82% stake in the banking group to bail it out at the height of the financial crisis in 2008.
The Treasury said the latest sale “represents an important step in the government’s plan to return institutions transferred from public ownership following the 2007-2008 financial crisis to private ownership.”
However, the sale price represents a loss of around £ 1.8bn, given that the government paid an average of 500p per share in 2008. The government’s remaining stake in NatWest is estimated at around £ 14bn. pounds over the bank’s current share price.
The government had planned to sell the entire public stake in NatWest by 2023/24, but it was expected to lose around £ 38.8 billion in the process, according to the Office of Fiscal Responsibility. However, following the impact of the coronavirus pandemic on global financial markets, the Treasury extended the deadline for selling the entire stake to March 2025.
The Treasury missed a dividend last year, as regulators banned payments to investors from banks when the pandemic hit, in a bid to ensure lenders had enough capital to weather the economic storm. NatWest has since declared a dividend of 3 pence per share for 2021, giving the government £ 225million as the largest shareholder.
In 2018, the government ceded a 7.7% stake worth almost £ 2.6bn to investors in the city at a loss. The first stake sale took place in 2015, when then Chancellor George Osborne had to defend a loss of around £ 1 billion.
NatWest said the off-market purchase triggered a £ 500million contribution to its main pension scheme.
Russ Mold, chief investment officer at AJ Bell, said: “It’s easy to forget that the government still has a significant stake in NatWest given that it has been 13 years since the bank was first bailed out during the crisis. global financial. Although a large portion of the shares now go to NatWest, it may still be a long time before the bank can revert to being a fully privatized company.
In contrast, the government sold its last remaining shares in Lloyds Banking Group in 2017, nearly a decade after the high street lender’s £ 20.3 billion bailout. At its peak, the government owned 43% of Lloyds.
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