When it comes to NatWest (LSE: NWG), it’s going to take more than just changes its name from Royal Bank of Scotland to get it back to anything like its former glory. Still, the NatWest share price has been doing better than Lloyds Banking Group, being up 3% over the past five years compared to Lloyds’ 16% loss.
And Thursday’s news brings closer a key step on the bank’s road back to full respectability. NatWest is still heavily government-owned, with the taxpayers’ stake amounting to 54.7% of its total market cap. A lot of investors will not feel happy until that drops, ideally to zero.
Granted, the government has not been interfering in the running of the bank, which is a good thing. But I certainly don’t want the potential for government (this one or a future one) to assert control. Now, the long-awaited return of the bank to private hands is set to move a little closer.
The government plans to sell off more of its NatWest shares starting 12 August. It claims that “shares will only be sold at a price that represents value for money for taxpayers,” but I don’t see how there can be anything meaningful behind those words. The bailout at the height of the financial crisis priced the shares, then RBS, at 502p. At the time of writing, the NatWest share price is down at 196p. Value for taxpayers? Well, make your own mind up about that.
Majority private ownership?
We don’t know how much of the publicly owned stake will be up for sale. But apparently it will be no more than 15% of the share volume currently being traded. Still, it does sound as if NatWest will be back in majority private hands before much longer.
What does it mean for shareholders? For one thing, it should free the board’s hands a little when it comes to returning capital. The bank has already indicated its intention to pay some as dividends. Analysts are predicting a yield of around 3.3% this year.
Maybe now NatWest can consider share buybacks too, once the danger of concentrating the government’s majority stake has passed. If it did that, it would show a belief that the shares are too cheap. And that might give the price an upwards nudge.
NatWest share price attractive?
So would I buy NatWest shares today? I already have some Lloyds, and one FTSE 100 bank is probably enough for me right now. And we do face the risk of a very uncertain economic future in the short to medium term. Investing in banks at the moment is not without risk.
But I do like NatWest’s robust-looking balance sheet and strong liquidity metrics. And if we see progress in returning some of the bank’s accumulating cash pile to shareholders, I might go for it. I’m going to be watching the NatWest share price closely.
