Treasury to sell £1.1bn in NatWest shares, cutting taxpayer stake to 54.8%

The government has launched the sale of a £1.1bn stake in NatWest to cut the British taxpayer’s holding in the bank, which was bailed out during the financial crisis more than a decade ago.

In the second selldown this year, UK Government Investments (UKGI), which manages the shares on behalf of the Treasury, said it would sell 580m shares, representing about 5% of the bank’s stock.

Issuing a statement after market hours, UKGI said the government’s stake in NatWest, formerly known as Royal Bank of Scotland, would be reduced to approximately 54.8% after the completion of the disposal.

The coronavirus pandemic has driven government borrowing to record levels, after the exchequer racked up a record £303bn peacetime budget deficit in the financial year ending in March.

The government also raised £1.1bn in March when NatWest agreed to buy 591m shares back from the government to accelerate reprivatisation, in an off-market deal authorised by the chancellor, Rishi Sunak.

Details of the latest disposal emerged before the stock market closed on Monday in a report by Sky News, before an official statement was issued by UKGI. The shares fell almost 4% from 204.9p to end the day down at 197p.

The government bailed out RBS at the height of the 2008 financial crisis, injecting £45bn to keep the bank afloat in order to prevent an even worse meltdown in the banking system from taking hold.

Taxpayers are not expected to recover all of the money pumped into the bank, with the shares still worth less than half the price the government paid more than a decade ago.

Although still far below the 502p a share price the government paid in 2008, NatWest shares have more than doubled from a low of 90.5p in September, fuelled by rising optimism over the UK economy as pandemic restrictions are relaxed.

The government has been gradually reducing its stake in the bank over recent years from a level of 79%, starting with a sale under George Osborne in 2015, when the former Conservative chancellor was forced to defend losing £1bn on the sale.

NatWest changed its name from RBS last year. The banking group still retains the Royal Bank brand for its operations in Scotland, alongside NatWest in England and Ulster Bank in Northern Ireland. It recently reported a rise in first-quarter pre-tax profits to £946m, compared with £519m a year earlier.

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