Should investors hold off from buying NatWest shares until a government sale?

NatWest shares have been steadily rising but with talks of the government offloading its stake, uncertainty surrounds the stock.

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Image source: NatWest Group plc

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NatWest (LSE: NWG) shares have got off to a flying start in 2024. But there’s a caveat. There’s a chance that they will be available more cheaply in a few months.

Time to sell Sid?

That may seem like a bold statement for me to make. And no, I don’t have a time-travelling machine (as much as I wish I did).

I say this because the government announced in March that it intends to continue selling off the remainder of its 38.6% stake in the high street stalwart.

It started buying shares during the Global Financial Crisis as it aimed to prop up the UK economy. Between October 2008 and December 2009, it acquired a majority stake in the business.

However, it’s now looking to offload what it has left. It’s believed the government may conduct the sale in a ‘Tell Sid’ style in the hope of “promoting retail investing and the UK’s capital markets”.

How much will it sell for?

The all-important question is how much it will sell them for and when. Chancellor Jeremy Hunt has said that any sale would need to see the government get “full value for money”. That’s rather ambiguous.

I believe it means a few things. Firstly, it seems that Hunt would like the UK stock market to be in a strong position and trading at high levels. The government will have to sell its shares at a discount to entice investors into buying the shares, otherwise, they’d be better off buying directly in the market, so this makes sense.

The sale will also likely coincide with falling interest rates. There’s believed to be over £300bn sitting in savings accounts in the UK as higher rates have made cash savings more lucrative.

However, as rates fall and become less attractive, the government believes that the appetite from retail investors to buy NatWest shares will increase.

Value for money

That makes sense. But even so, I’m eyeing NatWest stock today.

Trading on 5.7 times earnings, its shares do look like very good value for money. That’s nearly half the Footsie average. On top of that, its price-to-book ratio is 0.62.

There’s also its 6% dividend yield, which is enticing. Again, that trumps the average of its Footsie peers. The stock has also been gaining momentum recently as NatWest’s pre-tax operating profit jumped to £6.2bn for 2023.

That said, I’m wary of a few issues. I alluded to falling rates above. That will squeeze the bank’s margins. I also suspect 2024 will be choppy for UK banks amid a tough economic environment.

A smart time to buy?

I’d urge investors considering NatWest shares today not to focus too much on how its share price will perform over the next few months. As the old adage goes, time in the market is better than timing the market.

Yes, I could hold off from opening a position in the bank. But if its share price continues to perform at the level that it has been, then even buying them further down the line at a discount could mean I’ve missed out on gains.

With that, if I had the cash, I’d happily snap up NatWest shares today.

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.

Charlie Keough 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.

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