s is the government preparing to sell at least part of its nearly 60% stake in NatWest?
There is chatter in the city that it could be. You can see why. Shares have almost doubled and the bank is doing well – £ 946million in the first quarter.
At £ 2, the stock is still massively below the 500p the government had to bail out what was then RBS in 2008, but the Treasury has probably long lost hope of getting all its money back.
What does CEO Alison Rose think?
She’s not really supposed to have an opinion, at least not publicly. It is none of her business when the government decides to sell and she is not allowed to treat the government any differently from other investors. In theory at least, it just gets a pat on the shoulder the day before the stock market announcement is made.
That said, you don’t have to be a mental telepathist to suspect that she would probably like the government to continue.
Awesome, yes, and nice with that. It’s hard to see this spreading in the city.
At £ 2 a share, around £ 14bn. The government is unlikely to sell the lot all at once – such an offer would certainly lower the price. But £ 3 billion at a time seems achievable. It could be seen as part of the government saying, ‘We are going through the pandemic – Britain is back, even the banks are working!’
What is the downside of selling the shares? NatWest, like Lloyds, is closely linked to the UK economy. It must work for everyone’s benefit. In tough times, having a strong investor like government on hand is not a bad thing.
Bankers, including the admirable Rose, like to think that there is something wrong with governments having a stake in banks. They think banks work best outside of state control. But this is only a philosophical and political vision rather than a question of fact.
When RBS went bankrupt, and HBOS did, it wasn’t because of government ownership, was it? They then belonged to the private sector.
The dirty secret of bankers is that somehow they operate anyway with a permanent grant from the rest of us.
NatWest remains too big to fail. If it starts again, well, we’ll bail it out again. No other industry has that kind of inherent guarantee.
So why does the government not keep its stake, maybe forever?
You are clearly a dangerous Communist. Seriously, there isn’t a particularly good reason why not. NatWest could exist as a permanent window for private sector banks such as Barclays and Lloyds. A point of comparison.
But 14 billion pounds is a lot, right?
A billion here and a billion there, before long you’re talking about real money. You wouldn’t personally see what the government did with that money, and compared to a national debt of £ 2.3 trillion, it doesn’t matter that much.
Should I buy NatWest shares?
I thought so in 2010. I was wrong. If you are convinced that Covid is almost over and the Roaring Twenties are on, then why not. There should at least be a steady stream of income from now on.
Would it be cynical of me to think that it is easier for a bank to pay high premiums if there is no government involvement, and that this could be a motivation for wanting a sale as soon as possible? ?
Cynicism is not yours.
Come to think of it, if the bankers want our shares to be sold to them, in part to them, doesn’t that mean that they think they are undervalued, and therefore we have to wait a bit?
You know more about it than you suggest.