The government said it has devised a year-long trading scheme in which Morgan Stanley will be given permission to sell shares in the banking group on the open market.
Morgan Stanley will be given authority to offload NatWest shares through trading, provided the Treasury believes the price is fair value and market conditions are sound. Morgan Stanley traders will be limited to offering NatWest shares equivalent to no more than 15% of volumes. For example, if 1m NatWest shares change hands in the open market, Morgan Stanley could only sell 150,000 from the government's stock. The limit is intended to minimise the impact of sales on NatWest's stock price.
The government owns about 54.7% of NatWest following a financial crisis-era bailout when it was known as Royal Bank of Scotland. The current stake is worth around £12bn. No targets were given for how much the government is looking to raise from the trading scheme.
The Treasury has already sold off two chunks of NatWest so far this year, raising over £4bn, and has raised around £6.8bn selling NatWest shares since the bailout. Sales and dilutions have reduced the state's holdings down from a peak of 84%.
Until now the government has sold shares through an accelerated book build – an overnight offering of shares to select institutional investors – rather than on the open market. The Treasury said it could still launch accelerated book builds during the trading scheme if it chose to.
Shares in NatWest dipped 1.5% in early trading on the announcement.
Joseph Dickerson, an analyst at investment bank Jefferies, said the "drip" sale process could give NatWest more flexibility to buy back its own shares.
"Previously the bank was hamstrung in that buying back shares in the open market would have had the effect of increasing HMG's shareholding (in % terms)," he wrote in a note. "We model £800m of buybacks in Q4 for NWG."
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