Interactive Investor

NatWest retail share offer latest

There is speculation in the press that Jeremy Hunt is putting together the final pieces of a plan to offer the public a chance to buy shares in the high street lender. City writer Graeme Evans reports.

7th May 2024 15:41

by Graeme Evans from interactive investor

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NatWest bank branch exterior 600

Bonus shares for retail investors are reportedly under consideration as the government finalises the details of a Tell Sid-style privatisation of its remaining NatWest Group (LSE:NWG) shares.

Sky News also said the proposed public offer is likely to have a £10,000 cap on applications and a £250 minimum investment to encourage wider participation.

The plans are being drawn up after Chancellor Jeremy Hunt pledged last November to explore a mass-market share sale to create a new generation of retail investors.

NatWest shares, which were 204p in the hours after Hunt’s surprise announcement, traded as high as 317.9p this afternoon, a six-year best, as sentiment continues to improve across the banking sector.

NatWest Group performance chart

Source: TradingView. Past performance is not a guide to future performance.

A record high for the FTSE 100 index has also created a favourable backdrop for the sale as the government looks to fulfil its commitment for a full exit of its NatWest stake by 2025-26.

The 84% position taken after the 2008 rescue of Royal Bank of Scotland was down to 37% by the start of this year, falling to 27% or a total of £7.2 billion by the end of April.

UBS notes that the current level of open market share sales combined with NatWest buybacks could reduce the Treasury position to 21-22% by the month end.

The City bank said: “If the Treasury continues selling in the open market at current rates the shareholding would be roughly 17% by mid July, worth £4.6 billion at today's price.”

To get to a 10% residual stake would require a 7% sale of stock worth £1.9 billion, less than the two institutional placings worth £2 billion and £2.5 billion in 2015 and 2018 respectively.

Sky News said an announcement on the launch of the public offer could come late May or in early June, subject to market and political conditions.

It revealed that ministers have been exploring plans that could award one bonus share for every 10 bought by retail investors and held for at least a year.

The proposed ceiling of £10,000 would mirror a previous Treasury plan - subsequently abandoned in 2015 - for a retail offering of Lloyds Banking Group (LSE:LLOY) shares.

NatWest recently posted robust first-quarter results, including the return to positive trends in its net interest margin alongside profits 5% ahead of City forecasts at £1.3 billion.

Broker Peel Hunt, which has a 330p target price, views NatWest independence as important for the rating of the shares.

The broker said recently: “The end of directed buybacks would mean that share repurchase programmes would have a greater market impact.”

In addition, the desire to remove the government as a shareholder has meant a bias towards buybacks. “Although we expect significant share repurchases to remain a core part of the investment case for NatWest, capital deployment decisions could evolve more in favour of growth capital initiatives in the future.”

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