NatWest share sale in jeopardy after General Election called, analysts warn

23 May 2024 , 10:38

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The Government is hoping to fully offload its ownership of the taxpayer-backed bank, which it bailed out during the 2008 financial crisis (Image: PA Wire/PA Images)

The much-anticipated public sale of NatWest shares could be in jeopardy following the Prime Minister's snap decision to call a General Election for July 4, sparking concerns among analysts.

Following the election announcement on Wednesday night, NatWest's stock took a hit Thursday morning, casting doubt on the planned retail share offer. The Government has been keen to divest its stake in NatWest, which it acquired during the financial rescue in 2008, aiming to completely exit by 2025 to 2026.

Chancellor Jeremy Hunt had earlier unveiled intentions to begin selling shares to ordinary investors as soon as this summer. Currently holding about 27% of NatWest, the government has been actively reducing its involvement.

However, an unexpected July election, previously thought to be more likely in October or November, could disrupt these plans, initiating a flurry of election campaigning and leading to the dissolution of Parliament. This may delay the Government's plans to launch the sale this summer, which was expected to include a discount on NatWest shares.

Investment bank analysts Robert Sage and Stuart Duncan from Peel Hunt said: "This share sale cannot take place before the General Election and the new government, which polls are currently suggesting is likely to be formed by the Labour Party, may or may not proceed with this initiative."

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Labour currently holds a 20-point lead over the Conservatives in opinion polls, according to recent data. Mr Sage and Mr Duncan have suggested that if the share sale is cancelled, it could delay the Government's ability to fully divest its stake in the lender.

Gary Greenwood, an analyst at Shore Capital Markets, said: "In the seemingly unlikely event that the Conservative Party is re-elected, we would expect a rapid thaw and for such plans to be swiftly reintroduced. However, should the Labour Party come to power, as widely anticipated, then such plans are likely to be revisited and possibly amended."

Despite this, he believes any government will ultimately want to reduce and eventually exit its shareholding in NatWest. Last month, NatWest's chairman Rick Haythornthwaite stated that returning the bank to private ownership would "bring an end to a sorry tale for the UK and for the bank", referring to the bank's rescue by UK taxpayers around 15 years ago.

On Thursday morning, shares in NatWest saw a decrease of about 2%. NatWest has chosen not to comment on these reports.

Lawrence Matheson