In a note published on Thursday, the investment bank, which rates NatWest at ‘neutral’ with a 214p target price, said the decision of the government to sell up to 15% of shares in the group over the coming 12 months “raises the prospect of a confirmed buyback” in the company’s second-quarter results, highlighting that NatWest can buy 4.99% of itself from the state each year.
“While there are headwinds from restructuring and regulatory change, NWG is clearly significantly overcapitalised and capital generative. Its challenge has been that, if a buyback were started now, the govt stake would rise in percentage terms, freefloat would fall and traded liquidity suffer. With the government selling in the market there is good sense, we think, in announcing a matching repurchase program at 2Q results”, analysts said.
UBS also said that while an earlier buyback from NatWest will “bring forward” their forecast share count decline by six months, they still think such a move “should be positively received”.
After bailing out NatWest Group at the height of the credit crunch of 2008, Her Majesty’s Treasury’s (HMT) currently owns around 6.3bn ordinary shares in the company, which represents a 54.7% stake.
UK Government Investments Limited (UKGI) said it has instructed the investment bank that the intention is for “up to, but no more than, 15% of the aggregate total trading volume in the company will be sold” in this plan.
In mid-morning trading on Friday, NatWest shares were up 2.2% at 198.5p.