Since bailing out what was then Royal Bank of Scotland, the UK government has held a big stake in NatWest Group (LSE: NWG) shares.
Rumours of a sale have been growing in the past year, and we’ve finally heard something concrete. Well, maybe slightly firmer.
On 6 February, we heard that the sale of the 35% of the FTSE 100 bank still in state hands “potentially could happen” by June.
I reckon that could be good for private investors in two ways.
‘Tell Sid’ again?
First is that chancellor Jeremy Hunt has been talking about maybe selling the shares to the general public. So we might get the chance to buy directly, rather than the fat cats in the City getting their hands on them.
We might even see a new ad campaign taking us back to the ‘Tell Sid’ days when the government offloaded British Gas.
That was back in 1986, and it helped attract people to the idea of buying and holding shares. In fact, it was the privatisation of British Telecom (now BT Group) that got me started, all those years ago.
I do think it’s a shame that so many in the UK really don’t like the idea of buying shares. It’s got to be the best chance most of us have of building a bit of wealth to help fund our retirement years.
Ending uncertainty
The other good thing about any NatWest sale is that it would get rid of the uncertainty. When a government holds a stake in something like this, we don’t really have a free market. And if it decides to dump, the market could be upset quite badly.
If you want to offload 35% of a major FTSE 100 firm, you have to make it attractive. And that’s a big threat to those who already hold shares. They know that, any day, a state sale could send their shares down.
I also wonder how it can all really tie in with the chancellor’s stated desire to achieve “full value for money“.
Sell when they’re cheap?
NatWest Group shares are on a very low price-to-earnings (P/E) ratio of only around five. And we’re looking at a 7% dividend yield. So the government would need to offer a better deal than we already have just buying the shares on the open market.
If I owned NatWest shares and wanted to sell them and see full value for money, I wouldn’t sell them now. It can’t be anything to do with an election sweetener, can it? Surely not.
Buying shares is always a risk. And bank shares are under a lot of pressure right now. The Bank of England still doesn’t have the confidence to drop interest rates. And some are predicting a new rise in inflation later this year.
In the queue
It could be some time before we know the full damage the economy is doing to our FTSE 100 banks. But one thing I do know is that if the government does sell off its NatWest shares this summer, I’ll be wanting some.
