Government brings ownership of NatWest to 22.5%

Published

4 months ago

May 31, 2024

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Life comes at you fast if you are the person responsible for maintaining the shareholder register at NatWest.

Until last week, it was hoped that the bank would be at the centre of Jeremy Hunt‘s plans to get millions more Britons investing in the stock market.

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The chancellor first said last year that he hoped a new generation of retail investors could “engage with public markets” by buying some or all of the government’s remaining shareholding in NatWest.

With a nod to Margaret Thatcher’s successful privatisations in the late 1980s – which saw more than 10 million Britons become shareholders for the first time via stakes in businesses like British Telecom, British Airways and Rolls-Royce – the chancellor conjured up the spirit of the “If you see Sid, tell him” advertising campaign that, in autumn 1986, convinced more than 1.5 million Britons to buy shares of British Gas.

He told MPs in November: “It’s time to get Sid investing again.”

Those plans have now been scuppered by the unexpectedly early general election and the retail offer was formally shelved last weekend.

Determined to return to private ownership

Today, though, brought evidence that the government remains determined to return NatWest to private ownership.

It announced it has sold £1.24bn worth of shares in the lender back to NatWest itself – taking its stake down from nearly 26% to 22.5% in the process.

That stake, at its peak, had stood at nearly 84% after Gordon Brown‘s government was forced to rescue the lender – then called Royal Bank of Scotland – in 2008 at the height of the global financial crisis.

The government took its stake below 30% – which is deemed to be a controlling shareholding – with a sale to institutional investors in March this year.

The latest sale, carried out off-market, was at a price of 316p-a-share – a smidgen below NatWest’s closing price of 316.2p on Thursday night. It is the fourth such buy-back by NatWest of its shares from the government since 2021.

‘Important milestone’

Paul Thwaite, NatWest’s chief executive, said: “This transaction represents another important milestone for NatWest Group, building on recent momentum in the reduction of HM Treasury’s stake in the bank.

“We believe it is a positive use of capital for the bank and for our shareholders and represents further progress against the ambition to return NatWest Group to full private ownership.

“Our focus remains on delivering for our customers which will, in turn, deliver for our shareholders and the UK economy.”
There are a few observations to make here.

The first is that, attractive as it would have been to get a new generation of retail shareholders investing in the UK stock market, selling down the government’s stake in NatWest in this way delivers better value for money for taxpayers.

That is because the government would have been forced to sell its NatWest shares at a significant discount to the prevailing market price to encourage retail investors to pony up.

It would also probably have had to have offered other incentives, such as bonus shares for those shareholders retaining their stake for a year, to avoid those investors from ‘stagging’ the issue, in other words, buying the shares at a discount and then selling them immediately to lock in a modest profit.

Likely a shareholder for years but more sales in the coming weeks

The second observation is that the government – whoever wins the general election – is likely to remain a shareholder in NatWest for some time to come.

While a retail share offer might not necessarily have represented good value to taxpayers, it would certainly have accelerated the bank’s full return to private ownership. Mr Hunt has pledged to return NatWest to full private ownership by the end of 2026.

And a third is that this latest move does not preclude further share sales in coming weeks.

The Treasury has been using three ways to reduce its stake.

One is via direct sales to NatWest itself. This is unlikely to happen again for a while because it needs to be approved by NatWest shareholders – and the most recent authorisation has just been fulfilled by the latest purchase.

The second is via sales of large portions of the government stake to shareholders – which requires a sign-off by ministers and is therefore unlikely during the election campaign.

The third is via the Treasury’s existing sales plan, under which small quantities of stock shares are released into the market, which is probably the way forward for now.

The government’s exit via this latter route will undoubtedly be aided by the rally in NatWest shares which, since the start of the year, are up by just over 43%. The lender recently published its best annual results since the rescue of the old RBS.

What does Labour make of it?

What is not yet clear is the attitude that a future Labour government might take on the stake in NatWest.

It was always suspected when Jeremy Corbyn was Labour leader that, should he become prime minister, he would have retained the shareholding.

Sir Keir Starmer, by contrast, is assumed to be sympathetic to selling down the stake just as the current government is.

As Gary Greenwood, banking analyst at the investment bank Shore Capital, told clients earlier this week: “Should the Labour Party come to power, as widely anticipated, then such plans [for a retail share offer] are likely to be revisited and possibly amended.

“That said, whoever wins the election will still be looking to reduce and ultimately exit the Government’s stake in NatWest, in our view, so the sell down is still likely to continue in one form or another.”

Mr Thwaite and his colleagues would doubtless like to see NatWest returned to private ownership as quickly as possible so they can get on with running the bank and restoring its fortunes.

It would be helpful for all concerned were Mr Hunt’s shadow, Rachel Reeves, to make it clear where Labour stands on the timing of this.

Business

Labour lures BlackRock chief Fink to flagship investment summit

Published

36 mins ago

September 21, 2024

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Labour lures BlackRock chief Fink to flagship investment summit

The boss of BlackRock, the world’s largest asset manager, will attend the new government’s flagship investment summit next month amid suggestions it is struggling to attract large numbers of high-calibre international business figures.

Sky News has learnt that Larry Fink, BlackRock’s chairman and chief executive, will attend the 14 October gathering, which will be held at a prominent central London venue.

Mr Fink, who was also present at a similar event organised by the Conservatives in 2021, will be among the most influential global bosses to attend.

Among the others who have agreed to come are Margherita della Valle, the Vodafone chief executive, Hemant Taneja, CEO of technology investor General Catalyst, and John Graham, who runs the Canada Pension Plan Investment Board, one of the world’s largest pension plans, Sky News understands.

David Solomon, boss of the Wall Street bank Goldman Sachs, will also be there.

The emergence of some of those attending comes as Labour battles suggestions that it will struggle to draw the 300 industry leaders it pledged in early August.

Sources said fewer than 150 companies had confirmed their bosses’ attendance, with just over three weeks until the event takes place.

Roughly 100 ministers, metro mayors, officials and other government-connected figures are also expected to be present.

One insider insisted this weekend that “quality is more important than quality” and said the government remained on track to have 300 people at the summit.

That figure may ultimately be reached but comprising both the government and private sector delegations.

They questioned, however, why a formal numerical target had been set publicly when the summit was being staged at such short notice.

“It’s made us a hostage to fortune,” said one.

The event, which Labour vowed during the general election campaign to hold within 100 days of coming to power, is being seen as a key test of its economic credibility.

Whitehall officials are keen to announce investment deals worth tens of billions of pounds on 14 October, although whether they will hit this target is unclear.

Some corporate bosses, including the heads of Blackstone and JP Morgan, have declined the invitation, citing diary commitments.

Those two companies are expected to send alternates to the event, with Blackstone being represented by Lionel Assant, one of its most senior private equity executives.

Until recently, the government had insisted that only CEOs would be able to attend, with their invitations not transferable, according to insiders.

Aviva, Barclays, BT Group and HSBC Holdings will be among the FTSE-100 companies represented by their CEOs.

The business secretary, Jonathan Reynolds, told the Financial Times this weekend that details of the government’s industrial strategy would be set out before the investment summit.

That is expected to include the appointment of a chair for its Industrial Strategy Council, although it faces going into the event without an investment minister being appointed.

The summit will also be politically delicate given that it comes just a fortnight before Rachel Reeves, the chancellor, delivers her first Budget – with higher taxes affecting many of those attending on October 14 expected to feature prominently.

The Department for Business and Trade declined to comment, while none of the companies contacted by Sky News would comment.

Business

Trio of property giants oppose Cineworld rent cuts plan

Published

20 hours ago

September 20, 2024

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Trio of property giants oppose Cineworld rent cuts plan

A trio of property giants has lodged a protest against a radical financial restructuring that will see Cineworld imposing steep rent cuts on its landlords.

Sky News has learnt that British Land, Landsec and Legal & General Investment Management all voted against the cinema operator’s restructuring plan this week.

Cineworld has confirmed plans to close six of its UK multiplexes, but documents circulated to creditors show almost 50 others are in categories requiring landlords to agree to revised rent deals in order to ensure their long-term viability.

Although they carry significant influence in the commercial property sector, the trio’s protest will have no impact on the outcome of the company’s proposals, since its owners are now also among its largest creditors, meaning they can effectively force the deal through.

According to documents sent to creditors during the summer, 33 sites – categorised as Class B – “require a reduction of rent to ERV [Estimated Rental Value] Rent in order to place the sites on a viable long-term footing”.

A further 38 of Cineworld’s cinemas would be unaffected, while another 16 Class C1 and C2 leases require reductions to either turnover rent or zero rent in order to render them financially viable.

The documents added that the company did not have sufficient funding to meet a quarterly rent bill on June 24 of £15.9m.

“The UK group did not have sufficient liquidity to make the June 2024 Rent Payment and required further funding from the US Group to meet this liquidity need.

“Absent this funding, the UK Group would have been insolvent on a cashflow basis.”

Cineworld is being advised by AlixPartners.

Other cinema operators are now poised to step in to take over some of Cineworld’s sites.

The company trades from more than 100 locations in Britain, including at the Picturehouse chain, and employs thousands of people.

Cineworld grew under the leadership of the Greidinger family into a global giant of the industry, acquiring chains including Regal in the US in 2018 and the British company of the same name four years earlier.

Its multibillion-dollar debt mountain led it into crisis, though, and forced the company into Chapter 11 bankruptcy protection in 2022.

It delisted from the London Stock Exchange last August, having seen its share price collapse amid fears for its survival.

Cineworld also operates in central and Eastern Europe, Israel and the US.

Business

Consumer confidence slumps following warnings of ‘tough choices’ in budget ahead

Published

1 day ago

September 20, 2024

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Consumer confidence slumps following warnings of 'tough choices' in budget ahead

A long-running measure of consumer confidence has slumped to levels last seen at the start of the year following warnings of “tough choices” ahead in the looming budget.

GfK’s Consumer Confidence Index fell seven points in September to minus 20, with significant drops in predictions for personal finances and the general economy over the coming year.

The report’s authors suggested it was “not encouraging news” for the new government, which has made growing the economy its top priority.

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But within weeks of taking the post of chancellor, Rachel Reeves – followed by prime minister Sir Keir Starmer – moved to warn of a legacy £22bn “black hole” in the public finances and said it would result in a painful budget on 30 October.

Among measures already taken include cuts to winter fuel payments, leaving up to 10 million pensioners up to £300 worse off, and inflation-busting public sector pay settlements.

Tax rises and spending cuts are widely expected in next month’s statement to MPs though The Times reported on Friday that a decision by the Bank of England to slow a programme of loss-making bond sales would leave Ms Reeves £10bn better off than she had anticipated.

It added that she was still expected to push forward with her budget plans anyway as a signal of her commitment to fiscal discipline.

The latest snapshot on the public finances, released by the Office for National Statistics (ONS) on Friday showed net borrowing of £13.7bn during August.

Its chief economist, Grant Fitzner, said: “Borrowing was up by over £3bn last month on 2023’s figure, and was the third highest August borrowing on record.

“Central government tax receipts grew strongly, but this was outweighed by higher expenditure, largely driven by benefits uprating and higher spending on public services due to increased running costs and pay.”

Consumer spending accounts for around 60% of the UK economy.

Data released separately on Friday showed a 1% rise in retail sales volumes during August in the wake of weakness, mostly blamed on poor weather, over the previous couple of months.

The ONS said that the increase was driven by supermarket sales, as demand for BBQ food and drinks rose due to the arrival of some sunshine over the key holiday month.

It also credited discounting by clothing retailers.

The data chimes with the latest updates from big retailers, including Next and B&Q’s owner, which have spoken of weak demand for so-called big ticket items such as home furnishings and kitchens respectively.

GfK’s closely-watched survey showed expectations for the general economy over the next 12 months fell by 12 points to -27, while the forecast for personal finances was down nine points to -3.

Commenting on its key measures, including the headline figure, consumer insights director at GfK Neil Bellamy said: “These three measures are key forward-looking indicators so despite stable inflation and the prospect of further cuts in the base interest rate, this is not encouraging news for the UK’s new government.”

He added: “Strong consumer confidence matters because it underpins economic growth and is a significant driver of shoppers’ willingness to spend.

“Following the withdrawal of the winter fuel payments, and clear warnings of further difficult decisions to come on tax, spending and welfare, consumers are nervously awaiting the budget decisions on October 30.”