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.
The post Will NatWest shares be worth buying when the UK government offloads its stake this summer? appeared first on The Motley Fool UK.
5 Shares for the Future of Energy
Investors who don’t own energy shares need to see this now.
Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.
While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.
Open this new report — 5 Shares for the Future of Energy — and discover:
Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
How to potentially get paid by the weather
Electric Vehicles’ secret backdoor opportunity
One dead simple stock for the new nuclear boom
Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!
Grab your FREE Energy recommendation now
More reading
The NatWest share price is rising fast! Am I too late to buy?
I’m looking at undervalued UK shares as the FTSE 100 keeps rising!
Should I buy NatWest shares today or wait for a government sale?
Are these the best stocks to buy on the FTSE right now?
£1K bags me 411 shares in this 7% yielding income stock
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.
