Nat West Group 'Offer for Sale' – Also 'Auf Wiedersehen' Tui Travel – Am I bothered? No!
19 February 2024, 07:54 | Updated: 19 February 2024, 08:28
- David Buik is LBC's Markets Commentator and a Consultant to Aquis Exchange
Voters, politicians, business, and trade unionists will be waiting with bated breath to hear the content of Jeremy Hunt’s almost certainly final Budget speech at lunchtime on Wednesday, 6th March 2024.
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Amongst the copious pieces of legislation that the Chancellor will be putting before the House of Commons will be the Government’s plans for disposing of the taxpayers’ final 38.6% of its holding in NatWest Group’s shares, to the public at large.
It is thought that the Government, in conjunction with Charles Donald, chief executive of UKGI and Holger Vieten, the director at UKGI with responsibility for financial institutions together with advice from Goldman Sachs, Barclays and Freshfields, will hope to facilitate the sale of these shares to the public towards the end of June 2024.
I am not sure I quite understand the logic behind this sale, apart from raising about £7 billion for the taxpayer’s stake assuming the shares are offered to retail investors at a 5%-10% discount.
That is not an inconsiderable amount of money. I think it is probably realistic to assume that taxpayers will never recoup their losses from RBS/NatWest in the foreseeable future, when, despite this group having paid fees for the bailout.
Breakeven for these shares, having accounted for splits and rights issues pre the 2008/9 financial crisis, is circa 508p. NatWest’s share price, after some excellent numbers on Friday, when NatWest posted their best results since the credit crisis, including a pre-tax profit of £6.17 billion for the year, leapt by 7.09% to 229.5p.
As readers will observe, the shares still remain significantly ‘underwater.’
The late and much respected Lord Alastair Darling, the Chancellor of the Exchequer in 2008/9 appointed an excellent CEO in Stephen Hester to replace the reckless and disgraced Fred Goodwin. Heston’s tenure was short at RBS, due to his inability to build a relationship with the Conservative incoming Chancellor, George Osborne.
Ross McEwan did as decent job as CEO until handing over the reins to Dame Alison Rose in November 2019.
Dame Alison accelerated NatWest’s progress to full health, until she was forced to resign after admitting she leaked details about the closure of Nigel Farage's accounts a Coutts & Co, to BBC’S Business Editor, Simon Jack.
Peter Flavel, the CEO of Coutts position became untenable, and he was forced to resign shortly afterwards. The business community felt that the Chairman, Sir Howard Davies, and the board of NatWest prevaricated too long, before taking the necessary steps to remove the incumbent management.
Consequently, the bank’s share price came under a considerable amount of pressure. It fell from 260p on 20th July 2023 to 176p on 1st November 2023. This unfortunate calamitous incident certainly damaged NatWest’s brand temporarily. Unfortunately for NatWest, this tawdry affair has not been put to bed.
Nigel Farage has very recently regurgitated the threats he made last autumn to take legal action unless his compensation claim is settled.
Against a background of very positive results and the appointment of Rick Haythornthwaite as chairman from the AGM in April 2024 and the promotion of Paul Thwaite as CEO, will help smooth over smouldering acrid corporate governance issues.
My Haythornthwaite has an excellent CV, having been a very successful CEO at Blue Circle and at Invensys, both ironically sold off to French acquisitors, Lafarge and Schneider respectively.
He is currently chairman of Ocado. Mr Thwaite was an internal appointment. He was previously head of commercial & institutional business.
Let’s be candid. The banking sector, with a few exceptions has not been a great sector for investment in the UK over the past fifteen years. It has been a seriously costly laggard, courtesy of the banking crisis. The total cost to the taxpayer to bailout RBS, as it was then, after the Government had two ‘bites at the cherry’ in 2008/9 was an eye-watering £46 billion. In hindsight, perhaps the Government could have sidled off the toxic debt into a ‘Bad Bank’, which might have allowed the RBS/NatWest Group to recover more quickly.
However, it was not to be. Banking may still have too many challenges to contend with for the unsuspecting public to get too seriously embroiled in. I am not proffering investment advice. I merely observe. I look forward to hearing the pearls of wisdom and philosophical gems from the Government, Goldman Sachs, Barclays, Freshfields and all other official advisors.
Back in 1986 the call to arms for retail investors under the banner of ‘Call Sid’ to buy shares in utilities such a British Gas, BT and others during the Thatcher era, was a hugely exciting experience.
Many people became shareholders for the first time in submitting their pink allocation slips with a cheque for £250 attached to the issuing bank.
Punters were virtually guaranteed a modest profit. However, I fear that offering NatWest shares to the public, even at a discount, may be the wrong asset class to entice the retail investor into.
Panmure Gordon’s Simon French made a very poignant comment in saying – “NatWest is in a low valuation sector with fierce disruptive competition. AI-driven tech is what investors are heading towards, not banks!”
In passing, Tui Travel, having posted slightly better results last Thursday, served notice that it will stop having dual listing in London and that its shares in the future will only be quoted in Frankfurt.
The Anti-BREXIT brethren have had another pop at how dispiriting life in the financial sector in the City of London is becoming! Not So! There is little correlation with the ARM floatation and the impending loss of CRH’s and Futter’s IPO to New York and losing the quotation of a German travel company, whose track record in recent years has been moderate to say the least.
Yes Tui did purchase Thos Cook and Thomson Travel in years gone by, but the company is German – TUI AG – Aktien Gesellschaft - ‘Auf Wiedersehen, pet’, with our good wishes!
Should we be that bothered? – Not really!
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