NatWest share sale to gauge sentiment in UK equity market

NatWest share sale: The UK government's forthcoming sale of shares in NatWest bank is set to test the waters of the nation's equity market, amid a recent surge that saw the FTSE 100 reach a historic peak this week. The planned divestment, aimed at encouraging greater public investment in UK-listed companies, comes as Finance Minister Jeremy Hunt seeks to reignite enthusiasm akin to the privatisation campaigns of the 1980s.

However, amid global geopolitical uncertainties and economic instability, convincing investors to participate in NatWest's share offering poses challenges, according to wealth managers and market observers. Dan Boardman-Weston, CEO at BRI Wealth Management, highlights concerns about low sentiment towards UK investments and the need to address financial literacy issues before promoting equity ownership.

Critics view the sale as potentially oversimplified, with Mark Bentley of ShareSoc cautioning against underestimating the complexities of investing in banks. Furthermore, the timing of the sale, reportedly planned in the lead-up to a general election, has raised scepticism about its political motivations.

While UK Government Investments, managing the taxpayers' stake in NatWest, collaborates with advisors on sale details, including size and discount, concerns linger about attracting investor interest. Nicholas Hyett of Wealth Club questions the appeal to investors given the current market conditions and recent volatility.

Despite challenges, NatWest CEO Paul Thwaite remains optimistic, emphasizing the importance of reducing the government's shareholding and preparing for a potential retail offering. The government aims to fully exit its stake in NatWest by the end of 2026, having already reduced its ownership to below 30 per cent.

In devising the sale strategy, the government faces constraints, balancing market price and recent volatility. Previous privatisations enjoyed more flexibility in setting prices, unlike NatWest's case. To bolster investor confidence, NatWest stresses on its dividend payments and financial stability, while industry sources suggest a potential buyback to support the stock alongside a retail offer.

However, doubts persist about whether the sale alone can revive a UK share-owning culture, with concerns about investors prioritising short-term gains over long-term investments. Despite the FTSE-100's recent record high, monthly outflows from UK-focused equity funds reflect lingering investor apprehensions about British stocks.

Yet, existing NatWest shareholders remain hopeful that a government exit will eliminate the "interference discount" on its valuation, despite potential risks to the bank's public reputation.

(With Reuters inputs)