Jeremy Hunt has begun preparing for a public sale of NatWest shares worth billions of pounds, which could happen as early as June. This would be reminiscent of Margaret Thatcher’s privatisation policy “Tell Sid”, ahead of a General Election.
In his autumn statement of November, the chancellor stated that he will “explore options” to offer shares of the bank in a retail setting as part of efforts to revitalize the City. He said that he wants the public to be able to purchase shares in large companies, like they used in the Thatcher era and the John Major era.
The government has awarded a contract for market research to gauge public opinion. It has also invited tenders from public relations and advertising firms to create campaigns in support of a retail share sales.
The expectation is that the shares would be sold at a discounted price to attract the public.
Sources at Treasury have played down the idea that the chancellor would announce the sale during his budget on March 6.
Retail offers are more likely to occur in the summer before an election and possibly as early as June.
Taxpayers own 36% of NatWest. This was the Royal Bank of Scotland when it received its £45 billion bailout from 2008. The stake dropped from 84% to 36% mainly through the sale of shares to large institutional investors and the bank purchasing its own shares from the government.
The market research will determine the size of NatWest’s public offering. Shares closed Friday at 224p.
Walnut Unlimited’s £110,050 contract for market research, which it calls “the human understanding agent”, includes a schedule that shows the firm is actively testing the public’s interest in the shares. The company has been asked to complete the research by 31 January, deliver an initial report by 2 February and a final one by 9 February. Walnut has the BBC and Tesco listed as clients.
City Minister Bim Afolami fueled speculation last week by telling Bloomberg that prospects for a retail shares sale “looked good”. He said that he hoped to “kickstart” the share-buying of the public with the offer.
He told CityAM he wanted to make a change, as the younger generation is more interested in crypto assets. “Don’t only own crypto; own a NatWest share. Don’t just buy crypto, use your savings by enrolling automatically. Invest in Britain and the British stock exchange.”
According to a government spokesperson, “As set out by the chancellor in the autumn statement, as long as the market conditions are right and we achieve value for money, we will explore options for a NatWest Retail Sale over the next twelve months.” We will give more details when the time is right.
Hunt’s idea for a retail offer was a surprise to City sources, who were surprised that Hunt had raised it in November. At the time, NatWest, the company’s chief executive, Dame Alison Rose, had resigned after admitting she discussed the former Ukip leader Nigel Farage’s bank account with Simon Jack, the BBC business editor.
A difficult share sale could be caused by the economic and political background. Investors have been deterred from purchasing shares due to the rise in interest rates. They can earn more by saving in their bank accounts. Geopolitical uncertainties — the war in Ukraine and conflicts throughout the Middle East — also make people wary about investing.
The retail deal is not yet clear.
The government will try to sell its remaining NatWest stake at a low price, with a high yielding dividend. Investors who are looking for income should avoid “value traps” where a high yield is accompanied by low or no capital gains tomorrow. writes Ian Cowie.
It is sad to say that this was my experience when I worked for Lloyds Bank, and with a number of former building society companies that floated in the 1990s on the stock exchange before they collapsed in the 2008 global financial crisis. When the order was restored — including Lloyds’ disastrous rescue takeover of HBOS, formed in 2001 by the merger of Halifax Bank of Scotland and Bank of Scotland — none of the former building society banks remained independent.
This carpetbagger had accumulated shares of Bradford & Bingley, Northern Rock and Alliance & Leicester in the past. These “free” shares have since become worthless. It’s no wonder people say that windfalls aren’t worth keeping.
What relevance does this have to Lloyds or NatWest today? Lloyds shares are currently trading at an eighth of what they were before the financial crises, and yielding just a little over 6 percent income. Dividends were down by an average of 4.7% annually over the last five years while Lloyds share prices fell by 28%.
NatWest shares yield 7.1 percent income, but have no five-year record of dividend growth. The share price has dropped 17 percent from its previous level.
Both companies are pruning branches that no one wants to use anymore. Both businesses have not rewarded their shareholders as generously as they do their senior executives.
Whose money? This DIY investor doesn’t intend to bank with NatWest.