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Britain sells off last NatWest shares after crisis-era bailout

After a 60.59 billion pound ($45 billion) state-funded investment at the height the financial crisis in 2008, NatWest is now fully private. This ends a costly taxpayer-funded investment which reshaped both the lender and the industry.

The British government has sold the remaining 1% of its bank shares, according to an announcement by the Treasury on Friday. It had previously sold small blocks over recent years. It held up to 38% as recently as December 20,23.

In a press release, Finance Minister Rachel Reeves stated that "nearly 20 years ago, the government intervened to protect millions and businesses from the effects of the collapse RBS".

"That decision was made to protect the economy, and the return of NatWest to private ownership marks a turning point in the history of this country."

NatWest's reprivatisation is a turning point in the recovery of its business and mortgage lending in its home market. It transformed from an investment bank with a global reach to a more traditional, slimmed-down lender.

NatWest shares have risen by more than 30% this year, to 523 pence. This is above the 502 pence bailout. Prior government selldowns took place at lower prices, resulting in a loss for the rescue.

According to Britain's Finance Ministry, the government lost approximately 10.5 billion pounds in the 45 billion pound rescue when proceeds from share sales and dividend payments to finance ministry are added together with fees and other revenue.

The SYMBOL of EXCESS

NatWest's growth in the years leading up to the financial crisis became a symbol of excess in that time. It grew from being a small Scottish bank in the 1990s, to becoming one of the largest banks in the world, with a total balance sheet exceeding 2 trillion pounds in 2008, which was almost twice the annual British economic output.

Before its 2020 rebranding, the bank known then as RBS had sold assets that ranged from a fleet aircraft in Beijing to the largest hospital of Sydney. It also included a golf-course in Florida, 110 km away from the nearest highway, and an American graveyard. Deep South.

According to UK Finance, the bank, now under private ownership, is a significantly slimmed down lender, focused on its domestic businesses. It ranks third in Britain for mortgage providers behind Lloyds Banking Group, and Nationwide Building Society.

After the financial crisis, Britain introduced so-called "ring-fencing" rules to protect ordinary savers from the riskier activities of banks. It also aimed to boost competition by encouraging smaller challenger banks.

NatWest faces a challenge to increase fee-based revenue from businesses like wealth management. This is because incumbents have been largely unaffected by these efforts. Meanwhile, big rivals including HSBC are pursuing the same strategy in response to declining lending income due to Britain's central banks' policy rate cuts.

Paul Thwaite, the current CEO of the bank, has made it a priority to further simplify and streamline its operations and to promote economic growth by providing mortgages and business loans.

This is in line with the pressure the left-leaning Labour party has put on banks to kickstart the slow economic growth of the country. The ruling party may still tap the cash-rich banks via additional taxes to plug the gaps in the budget.

Alex Potter, Investment Director, Developed Market Equities, Aberdeen, said that NatWest had rebuilt its reputation but was still a political ball.

He said that the lender would continue to be under pressure to actively support the growth agenda of government.

NatWest executives said that the state exit would not affect how they do business. However, bankers and advisors believe that it may try to accelerate its growth strategy through further acquisitions in 2024 after a number of such deals. ($1 = 0.7427 pounds)

(source: Reuters)