Britain's NatWest to cut government stake with $1.5 billion buyback

LONDON (Reuters) – NatWest will buy back 1.1 billion pounds ($1.53 billion) of its shares from the government in the first off-market deal since the British bank was bailed out during the financial crisis.

FILE PHOTO: People maintain social distance while they queue outside a Natwest bank as the spread of the coronavirus disease (COVID-19) continues, in London, Britain, March 26, 2020. REUTERS/Hannah McKay/File Photo

The government’s two previous sales of part of its holding in NatWest, in August 2015 and June 2018, were wider market placements involving private investors.

“We believe this is a good use of capital for the bank and our shareholders,” NatWest CEO Alison Rose said on Friday.

NatWest, formerly Royal Bank of Scotland, said in a statement that the off-market deal for 590.7 million shares will settle on March 23 and will reduce the government’s shareholding to around 59.8% from 62%.

NatWest shares rose 1.8%, compared to a more than 1% fall in the FTSE 350 banks index.

The deal comes days after it emerged NatWest faces criminal money laundering charges and the risk of an unlimited fine over allegations it failed to detect suspicious activity by a customer depositing millions of pounds of cash.

The government said this month that it was targeting returning the bank to full private ownership a year later in 2026.

NatWest added it will also contribute 500 million pounds to its main pension scheme as a result of the share purchase.

Combined, the stock sale and pension increase will reduce NatWest’s tier one capital ratio by 72 basis points, and see around a 1 pence increase in tangible equity per share.

“We retain a strong capital position, well above our target range, which ensures that we remain well placed to navigate the uncertain environment and continue to support our customers,” Rose said.

Britain’s finance ministry said the deal “represents an important step in the Government’s plan to return institutions brought into public ownership as a result of the 2007-2008 financial crisis to private ownership”.

($1 = 0.7184 pounds)

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