NatWest shares to be sold off to public in echo of ‘Tell Sid’ campaign

City veteran says a discount of up to 10pc would be needed to encourage enough demand

Tell Sid British Gas advert
The 'Tell Sid' advertising campaign for the British Gas flotation came to symbolise the privatisation drive

The public will be offered the chance to buy the Government’s shares in NatWest within a year under a scheme that echoes the “Tell Sid” privatisations of the Thatcher era.

Shares in the bank are likely to be offered at a discount to the price at which they trade on the stock market, offering savers the chance of a quick profit.

One City veteran said a discount of up to 10pc would be needed to encourage enough demand.

The plan has echoes of Margaret Thatcher’s privatisations of the 1980s, when state-owned monopolies such as BT, the electricity companies and British Gas were floated on the stock market and shares offered to the public. 

The “Tell Sid” advertising campaign for the British Gas flotation came to symbolise the privatisation drive.

Jeremy Hunt told the Commons on Wednesday: “It’s time to get Sid investing again.”

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An offer of NatWest shares to the public would form part of the Government’s plans to eliminate its entire holding in the bank by 2026. 

It became the majority shareholder in what was then the Royal Bank of Scotland during the financial crisis, when it injected billions of pounds into the lender to prevent its collapse and the economic chaos that ministers feared as a consequence.

Official Autumn Statement documents say: “As part of the plan to return NatWest to the private sector, the Government will explore options to launch a share sale to retail investors in the next 12 months, subject to supportive market conditions and achieving value for money.”

On the stock market on Wednesday, NatWest shares barely reacted and were trading 1pc lower in the afternoon at 205p per share. 

However, the share price was as high as 310p in February, before the bank was rocked by the summer’s “debanking” scandal when Nigel Farage, the former Ukip leader, said he had been stripped of his account at Coutts, the NatWest subsidiary for the wealthy, because of his political views.

The scandal led to the departure of Dame Alison Rose, NatWest’s chief executive. Stock market investors also marked down the shares after lacklustre results from the bank were published last month.

‘A very different beast from British Gas’

City analysts say the shares look cheap at a discount of 25pc to the most recent valuation of the bank’s assets, while the stock market values the company at just five times its annual profits, compared with an average for listed companies of about 10.

“Normally you’d have to offer a discount but it can’t be free money [for buyers],” said Rob Burgeman of RBC Brewin Dolphin, a City firm. “I think you’d need to offer a discount of between five and 10pc to encourage enough demand from the public.

“NatWest is a very different beast from British Gas, which was a monopoly, whereas NatWest operates in a competitive market. But not having a dominant shareholder in the form of the Government would be welcome.”

If the Government had to offer a 10pc discount on the current share price to get the sale away, it would sell each NatWest share for about 184p. This compares with the 502p that the Government paid when it bailed the bank out – a loss of 63 per cent.

So far the Government’s efforts to reduce its stake in NatWest have focused on selling shares to institutional investors such as fund management companies, although it has also sold some directly to NatWest itself via a “directed share buyback”. Such sales, which do not involve the bureaucracy that comes with an offer to the public, will continue, the Treasury said.

The documents added: “The Government is committed to exiting its shareholding in NatWest, subject to market conditions and sales representing value for money. The Government intends to fully exit by 2025-26, utilising a range of disposal methods including accelerated bookbuilds [sales to institutions] and directed [share] buybacks with NatWest.”