NatWest Group: Disposal of Government-owned Shares
(Limited Text - Ministerial Extracts only)
Read Full debate
The Economic Secretary to the Treasury (John Glen)
I can today inform the House of the disposal of approximately £1.1 billion-worth of Government-owned NatWest Group (NWG, formerly Royal Bank of Scotland, RBS) shares, representing 4.86% of the company, by way of a directed buyback transaction. Government stake in NWG pre-sale 61.7% Total shares sold to NWG 590,730,325 million (4.86%) Sale price per share 190.5p Share price at market close on 18/03/2021 190.5p Total proceeds from the sale £1,125,341,269 billion Government stake in NWG post-sale 59.8% Metric Impact Net sale proceeds £1,125,341,269 billion Retention value range Within the valuation range Nil Public sector net borrowing There may be future indirect impacts as a result of the sale. The sale proceeds reduce public sector debt. All else being equal, the sale will reduce future debt interest costs for Government. The reduction in Government’s shareholding means it will not receive future dividend income it may otherwise have been entitled to through these shares. Public sector net debt Reduced by £1,125,341,269 billion Public sector net debt Reduced by £1,125,341,269 billion Public sector net financial liabilities Nil Public sector net liabilities Nil
Approximately £1.1 billion-worth of shares were sold to NWG in a single bilateral transaction on 19 March 2021.
Rationale
It is Government policy that where a Government asset no longer serves a public policy purpose, or that purpose may be more efficiently realised with the asset in private ownership, the Government may choose to sell that asset, subject to being able to achieve value for money. This frees up public resource tied up in the asset which can be deployed to achieve other public policy objectives.
The Government are committed to returning NWG to full private ownership, now that the original policy objective for the intervention in NWG—to preserve financial and economic stability at a time of crisis—has been achieved. The Government only conduct sales of NWG shares when it represents value for money to do so and market conditions allow. This sale represents a further step forward for Government in exiting the assets acquired as a result of the 2007 to 2008 financial crisis.
Format and Timing
The Government, supported by advice from UK Government Investments (UKGI), concluded that selling shares to NWG, in a single bilateral transaction, represented value for money.
Share buybacks are a common practice undertaken by companies looking to efficiently deploy their excess capital. On 6 February 2019, NWG obtained shareholder authority to purchase shares held by Government at market price. This authority was renewed at subsequent NWG annual general meetings in April 2019 and April 2020.
This is the third sale of NWG shares undertaken by the Government, following previous disposals in August 2015 and June 2018. This is the first sale of shares via an off-market share sale directly to the company.
The sale concluded on 19 March 2021, with NWG purchasing a limited number of its Government-owned shares. A total of c. 591 million shares—4.86% of the bank—were sold at the 18 March 2021 closing price of 190.5 p per share. The reduction in the Government’s shareholding is less than the percentage sold following the cancellation of shares by NatWest. Following this transaction the Government’s shareholding will stand at 59.8%.
Details of the sale are summarised below:
Fiscal impacts
The net impacts of the sale on a selection of fiscal metrics are summarised as follows:
[HCWS865]