NatWest Group has returned to majority private ownership after it agreed to buy back £1.2bn of shares from the UK government, more than 13 years after the company was bailed out by taxpayers at the height of the financial crisis.
The company, formerly known as Royal Bank of Scotland Group (RBS), said it had agreed to make an off-market purchase of 550m shares, or 4.91% of its share capital, from HM Treasury at Friday’s closing price of 220.5p, in a statement to the stock market on Monday.
The deal, the fifth since the bailout, will be completed on Wednesday, leaving the government with a 48.1% stake in the banking group, a symbolic moment after more than 13 years of majority state ownership. At the peak, the government owned 84% of the group.
Gordon Brown’s government announced the £37bn bailout in October 2008, after the collapse of the US investment bank Lehman Brothers caused chaos across the global financial system. As well as RBS, the bailout also included Lloyds TSB and HBOS, which later combined to form Lloyds Banking Group. Lloyds bought back the last of its shares from the government in 2017.
The path back to majority private ownership has been longer for NatWest Group, which became a symbol of the pre-financial crisis excesses of British banking, after a series of disastrous expansions under chief executive Fred “The Shred” Goodwin, who was later stripped of his knighthood after public ire. The chief executive, Alison Rose, ditched the RBS Group brand in 2020.
Rose said on Monday: “Reducing government ownership below 50% is an important milestone for NatWest and a further demonstration of the progress we are making.”
The latest NatWest share purchase price represents a substantial loss for the taxpayer, which paid an average of 500p a share in 2008. The government’s remaining stake will be worth about £11.9bn at Friday’s closing price.
John Glen, the economic secretary to the Treasury under the chancellor, Rishi Sunak, said: “This sale means that the government is no longer the majority owner of NatWest Group and is therefore an important landmark in our plan to return the bank to the private sector. We will continue to prioritise delivering value for money for the taxpayer as we take forward this plan.”
The government had planned to sell the entire public stake in NatWest by 2023-24, but delayed the share sales because of the pandemic.
The Office for Budget Responsibility, the independent budget watchdog, said last week that the government had recouped £134bn from its financial crisis interventions, compared with an outlay of £137bn.
That would leave the government with a cash surplus of £17.1bn for the financial crisis measures. However, that does not include the cost of borrowing to fund the bailout, with an estimated £47.7bn in extra debt interest costs, meaning the crisis has cost the government £31bn in cash terms alone.
Simon Adamson, the chief executive of debt ratings agency CreditSights, said the share sale was “an important milestone in NatWest’s reprivatisation”, albeit one with no “significant practical consequences”.
The Treasury has taken a hands-off approach to its stake and allowed the bank to be run in much the same manner as other commercial banks. It has paid out £1.1bn in bonuses to its bankers over the last four years alone, while Rose received £3.6m in pay for 2021 – well over 10 times more than the best-paid civil servants.
When he was shadow chancellor, the Labour MP John McDonnell called for the government to use its ownership to block high street branch closures, while some economists argued the government should have targeted the bank’s balance sheet at investments in the green economy.
McDonnell, other politicians and campaigners also pushed the government to do more to right the wrongs of RBS’s now infamous “global restructuring group” (GRG). The GRG unit mistreated small business customers and in some cases profited from their bankruptcies. RBS denied the allegation that it had deliberately pushed small businesses into liquidation.