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Is it time for government to sell its £14billion stake in bailed-out NatWest?

Simon English
·3-min read

Is the government getting ready to sell at least some of its near 60% stake in NatWest?

There’s some chatter in the City that it might be. You can see why. The shares have near doubled and the bank is nicely in profit -- £946 million in the first quarter.

At £2 the stock is still massively below the 500p at which the government had to bail out what was then RBS in 2008, but the Treasury has probably long given up hope of getting all of its money back.

What does CEO Alison Rose think?

She isn’t really supposed to have an opinion, at least not publicly.

It’s not her business when the government decides to sell and she isn’t allowed to treat the government differently to any other investor.

In theory at least, she merely gets a tap on the shoulder the night before the announcement that shares are being placed in the market.

That said, you don’t have to be a mental telepathist to suspect she would probably like the government to get on with it.

Is Rose good?

Terrific, yes, and nice with it. It is hard to see this catching on in the City.

What is the 60% worth?

At £2 a share, about £14 billion. The government would be unlikely to sell the lot in one go – that much supply would surely depress the price.

But £3 billion a time looks doable. It might be seen as part of the government saying “we are through the pandemic – Britain is back, even the banks work!”

What’s the downside of selling the shares?

NatWest, like Lloyds, is closely tied to the UK economy. It needs to function in everyone’s interests. In bad times, having a powerful investor on hand like the government is no bad thing.

Bankers, including the admirable Rose, like to think that there is something inherently wrong with governments having a stake in banks.

They think banks work better outside of state control. But that is just a philosophical and political view rather than a matter of fact.

When RBS went bust, and HBOS did, it wasn’t because of government ownership, was it? They were in the private sector then.

The bankers’ dirty secret is that one way or another they operate on a permanent subsidy from the rest of us anyway.

NatWest remains too big to fail. If it goes bust again, well, we’ll bail it out again. No other industry has this sort of inherent guarantee.

So why doesn’t the government just keep its stake, perhaps forever?

You are plainly a dangerous communist. Seriously, there is no particularly good reason why not.

NatWest could exist as a permanent counter to the private sector banks such as Barclays and Lloyds. A point of comparison.

But £14 billion is a lot, no?

A billion here and a billion there, before long you’re talking about real money. But you wouldn’t personally see what the government did with that cash, and compared to a national debt of £2.3 trillion it isn’t that significant.

Should I buy shares in NatWest?

I thought so back in 2010. I was wrong. If you are confident that Covid is almost over and that the roaring 20s are on, then why not. There should at least be a regular income stream from here on.

Would it be cynical of me to think that it is easier for a bank to pay high bonuses if there is no government stake, and that this could be a motivation for wanting a sale as soon as possible?

The cynicism is not yours.

Come to think of it, if bankers want our shares to be sold, partly to them, doesn’t that suggest they think they are undervalued, and that therefore we should wait a bit?

You know more about this than you let on.

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