UK Government Sells NatWest Shares (NWG.L) Back To The Bank, Raises £1.24B

Natwest shares (LON:NWG) are relatively unmoved today despite another big offloading of shares by the the UK government. As one of the best performing UK stocks for 2024, having gained 44.05% YTD, Natwest have actually bought back this tranche of shares, avoiding them being sold into the market and applying downward pressure. Shares trade up by 0.38% at the time of writing as the bank are expected to strike off half the shares bought back, and sell the remainder.

This is yet another step towards the planned re-privatization of the bank that the Government rescued during the financial crisis by selling a £1.24 billion chunk of its stake in NatWest Group. This move, announced on Friday, will decrease the government's holding in the lender by around 5%. The transaction involved the sale of shares back to NatWest, reducing the taxpayer's stake in the bank to around 22.5%, as the government continues its slow exit from its position.

This share sale marks a significant moment in the relationship between the government and NatWest, which has its origins in the financial crisis of 2007-2008 when the bank was bailed out in a £45.5 billion rescue deal. Since then, the government has been gradually selling off its stake in the bank, prioritizing financial stability and value for money for the taxpayer. The buyback of shares by NatWest itself is a sign of the bank's returned financial strength, enabling it to absorb the cost comfortably.

The government's strategy in divesting its shares has been through a “trading plan”, which is executed by investment banks to sell shares to institutional investors gradually. This drip-feed approach avoids flooding the market with a significant new stock, which could depress the share price. The government initially acquired an 82% stake in the lender during the rescue, and the sale of this particular parcel of shares represents a continued effort to return the institution to full private ownership.

The transition back to the private sector for NatWest is reflective of a broader trend in the UK and Europe, where banks that received state aid during the financial crisis have been returning to ordinary operation. While the timing and strategy of share sales depend on market conditions and the need to balance the books, the government is clearly on a path to reduce its footprint in the banking sector.

The NatWest share sale has implications for several stakeholders. For the bank, it symbolizes an ongoing rehabilitation and a move further away from its crisis-era past. For taxpayers, it suggests a potential recouping of the massive sums spent on bailouts over a decade ago — though it remains uncertain whether the government will ever break even on its investment. For the UK stock market, this transaction adds to the narrative of post-financial crisis recovery and the receding role of emergency state supports in the financial system.

The sell-down strategy has been slow but methodical, and while the government still retains a sizable holding, the move is a clear signal of the bank's resurgence and the government's confidence in Nativist’s stabilizing position in the market. The operation remains a balancing act between realizing value for the taxpayer and supporting a robust financial sector.