Will NatWest shares be worth buying when the UK government offloads its stake this summer?

The UK government’s planning to sell some of the NatWest shares it bought in the Global Financial Crisis. Will this be a great investment opportunity?

| More on:

Image source: NatWest Group plc

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

In March’s budget, chancellor Jeremy Hunt announced that the UK government plans to sell some of its shares in NatWest (LSE: NWG) – one of Britain’s largest banks – directly to retail investors. This sell-off could take place as early as June.

So what do we know about this government sale? And will the shares be worth buying for my portfolio?

Why the government’s selling

In an effort to support the financial services sector during the Global Financial Crisis of 2008/2009, the UK government acquired an 84% shareholding in the Royal Bank of Scotland (now NatWest Group).

However, it was never the government’s intention to be a permanent shareholder, and in recent years, it has been selling down its holding to institutional investors and the bank itself.

Looking ahead, it plans to offload more NatWest shares in the near future in a ‘retail sale’ to individual investors.

The government believes that selling to individual investors could help to promote retail investing in the UK and also help to re-invigorate the country’s capital markets through a landmark transaction.

It’s worth noting that the date of the retail sale has not yet been confirmed. However, guidance on the gov.uk website says: “The sale could take place this summer at the earliest, subject to market conditions being supportive and achieving value for money”.

How much will the shares cost?

As for how much the shares will cost, this is where things get a little vague. Hunt has said that any sale would need to achieve “full value for money“.

I think what he means here is that he’d like the UK stock market to be at a high level when the sale occurs so the government can get as much as possible for the shares.

I imagine the shares will have to be offered at some kind of discount to the market price however. Otherwise there would be little incentive to participate in the retail sale (we could just buy them directly in the market).

Worth buying?

Let’s assume for now however, that it won’t be possible to make a ton of money selling the shares in the market immediately after buying them in the retail sale (either the discount is small or the share price falls after the sale).

So is there long-term investment potential here? That’s hard to say.

On the plus side, the bank stock looks relatively cheap today (currently its P/E ratio is just 7.2) and it has a decent dividend yield (about 5.7%). The company’s also buying back a lot of stock, which is boosting earnings per share.

On the downside, NatWest is very much a UK-focused bank. And the UK isn’t really a growth market when it comes to banking these days. The industry’s also being disrupted rapidly by innovative FinTech companies.

Weighing up the pros and cons, I probably won’t be interested in buying NatWest shares in the retail sale. All things considered, I think there are likely to be better opportunities for my money this year.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

Nvidia stock is becoming more affordable!

Nvidia stock is up 2,500% over five years, but the chip giant’s share split -- announced during its earnings report…

Read more »

Investing Articles

Are Rolls-Royce shares good for passive income?

Our writer is getting mixed messages about the Rolls-Royce dividend. But whatever happens, he thinks passive income hunters will be…

Read more »

Investing Articles

Could the Rolls-Royce share price end 2024 above £5?

As the Rolls-Royce share price continues its remarkable run, our writer considers where it might be at the end of…

Read more »

Investing Articles

UK stocks are hitting all-time highs! Yet these 2 still look cheap to me

The FTSE 100's on a roll. But it's still possible to pick bargain UK stocks, provided we know where to…

Read more »

Satellite on planet background
Investing Articles

At just under £14, can BAE Systems’ share price still be a prime FTSE 100 bargain? 

Despite its bullish price run, BAE Systems’ share price still looks undervalued to me and appears set for strong growth.

Read more »

Photo of a man going through financial problems
Investing Articles

2 dividend shares I’d avoid like the plague in today’s stock market

The UK stock market is full of high-yield dividend shares that could equate to a steady stream of passive income.…

Read more »

Abstract bull climbing indicators on stock chart
Investing Articles

£17,000 in savings? Here’s how I’d aim to turn that into a £29,548 annual second income!

Generating a sizeable second income can be life-enhancing and can be done from relatively small investments in high-dividend-paying stocks.

Read more »

Investing Articles

With as little as £300 a month invested, this stock could net £16,000 a year in passive income

Putting a few hundred pounds each month into the stock market could eventually generate a five-figure annual passive income, this…

Read more »