UK Government Further Reduces Its Stake in NatWest Group, Moving Closer to Complete Privatisation

In a significant move within the UK banking sector, the British government has taken another step in unwinding its position in NatWest Group (formerly known as Royal Bank of Scotland), reducing its stake to below the critical threshold of 30%. This action, executed on March 22, marks a continued effort by the government to return the bank to full private ownership.

This latest share sale is a continued journey from the peak government ownership which stood at an 84% stake following a £46 billion bailout during the financial crisis of 2008. It underscores the transformation and rehabilitation of the bank, which has been under significant public scrutiny and government influence for well over a decade.

Since 2018, the government has been actively decreasing its hold on NatWest Group, with its stake falling from 62% to 37.98% by the end of 2023. This reduction in stake highlights the bank's steady recovery and the government's commitment to realign the bank with the private sector.

NatWest Group's transition back to private hands is set to continue with the aim of full privatisation by the year 2026. In an aggressive move to facilitate this transition, NatWest has proposed to buy back up to 15% of its shares held by the government. This proposal, which is significantly higher than the previous cap of 5%, is pending the approval of shareholders.

The trajectory of NatWest Group seems to be promising, backed by a cautiously optimistic outlook from analysts. The bank holds a Moderate Buy consensus rating, drawing from six Buys, two Holds, and two Sells from analysts. The consistency of this rating over time indicates steady confidence in the bank’s performance and future prospects.

Moreover, setting an average price target of 273.33p implies a moderate upside potential of 5.4%. Reflecting the bank’s performance and positive sentiment, NatWest Group's shares have surged nearly 24% year-to-date. This exemplifies the market’s reaction to the bank's turnaround and the government's steps toward privatisation.

The reduction of the government's stake in NatWest Group is not only indicative of the bank's return to form but is also emblematic of a broader trend of re-privatisation of assets nationalized during the financial crisis. The government's strategic divestment sets a marker for other nationalized entities and underlines the UK's approach towards managing state-owned assets post-crisis.

Investors and market watchers will closely monitor how this move will influence the bank's strategies and whether it will achieve the intended benefits of increased efficiency and shareholder value in the years leading up to the 2026 target for full privatisation.