(Bloomberg) -- UK Chancellor of the Exchequer Rachel Reeves is leaning toward offloading a substantial portion of the government’s £5.6 billion ($7.2 billion) stake in NatWest Group Plc to institutional shareholders rather than continuing with her predecessor’s plans to offer it up to the UK public, according to people familiar with the matter.
The sale to institutional shareholders would come alongside the government’s existing gradual winding down of its shareholding through a series of open-market sales, the people said, asking not to be identified discussing non-public information.
Representatives for the Treasury and NatWest declined to comment.
Shares of NatWest had climbed 54% this year through Thursday, outpacing the 17% advance of the FTSE All-Share Banks Index. The stock soared Friday morning after the bank boosted its forecast for full-year revenue as the lending giant reported net interest income and fee revenue in the second quarter that topped analysts’ expectations.
Under former Chancellor Jeremy Hunt, UK officials had been formulating plans to sell the shares the government holds in the bank to retail investors as part of plans to offload the entire stake by 2026. The moves were part of a broader plan to reinvigorate UK capital markets by stimulating consumers’ interest in owning British stocks.
But those plans have been on hold since former Prime Minister Rishi Sunak’s shock decision to call a general election for July 4.
The Labour Party, which won the election, had pledged to review the efforts. In the meantime, the government has continued to hasten its exit from NatWest and, earlier this month, the government’s stake in the lender dropped below 20% for the first time since 2008.
In addition to the open-market sales, NatWest also repurchased £1.24 billion worth of the shares through a directed buyback in May. The bank has also secured permission from shareholders that allow it to buy back its stock from the UK government even more quickly.
Even after it’s winded down much of its stake, the UK remains NatWest’s biggest investor following a financial-crisis-era rescue deal. The government owns 19.97% of NatWest, according to a regulatory filing earlier this month.
NatWest has already recorded about £24 million in costs tied to preparatory work it’s done for the potential retail share sale, Chief Executive Officer Paul Thwaite said on a conference call with media on Friday announcing the company’s second-quarter results. The company expects the government to share its priorities on the sale during its next fiscal event, he said.
“Decisions around the sale of the government’s shares are decisions for them — both the timing of that, the pricing of that or the mechanics,” Thwaite said. “That’s really a matter for the government and the Treasury.”
--With assistance from Katherine Griffiths, Alex Wickham and Joe Mayes.
(Updates with commentary from NatWest’s earnings call in 10th paragraph.)
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