Capital Group buys more than £110m in NatWest shares after UK government share cut

A leading US investor has started pouring cash into NatWest shares after a notable cut in the government’s shareholding helped to allay fears of state intervention in the bailed-out banking group.

Los Angeles-headquartered Capital Group, which is one of the world’s oldest and largest investment firms, with more than £2.5tn under management, has bought more than £110m worth of NatWest shares, days after the government cut its position, pushing the group into the bank’s top 30 shareholder list.

Capital had been considering buying a stake for months, after strong profits and a meeting with the newly appointed chief executive, Paul Thwaite, in February, it is understood.

NatWest last year made its biggest annual profit since the start of the financial crisis in 2007, helped by high interest rates. However, a City source said investors like Capital had been put off by the government’s 30% stake, which meant it was still classed as a controlling shareholder.

The government holding is a hangover from its £46bn bailout of NatWest, formerly known as Royal Bank of Scotland Group, which resulted in the state taking an 83% stake in the lender in the 2008 financial crisis.

The government’s stake fell below 30% for the first time in late March, opening the door to a fresh wave of investment from the US firm.

Benjamin Toms, an analyst at RBC Capital Markets, said: “Politics and banking have been fairly entwined from a European and UK perspective over the years, and that has always a bit of worry in the back of investors’ minds. If the government owns a sizeable stake, they can have a bit more leverage … around whether banks are adequately passing on higher rates to deposit holders, or lending to SMEs.

“There’s a worry that if the government has a stake in your firm, they could wield power, even if in realistic terms it shouldn’t make huge difference as a minority holder.”

Capital Group vehicles bought up 33m shares at the end of March, days after the government’s stake dropped, amounting to a nearly 0.4% stake, according to the last available public data. It is understood that Capital has since continued its buying spree.

Behind the UK government, the bank’s largest shareholders include MFS Investment Management, with a 5.1% stake, Norges Bank Investment Management, with a 3.7% stake, and the Vanguard Group, with a 2.3% stake.

Aside from financial crisis-era interventions on executive pay and conversations around the departure of the former chief executive Stephen Hester in 2013, ministers have taken a largely hands-off approach to the management of NatWest.

However, concerns over government influence were raised last summer after ministers pushed for the resignation of Alison Rose as chief executive after a row with the former Ukip leader Nigel Farage over the closure of his accounts at the private bank Coutts.

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In 2018 the Labour party signalled plans to halt further stake sales and use RBS to boost funding to small businesses. Labour’s current leadership under Keir Starmer has not voiced any similar plans.

Speaking at the AGM last month, NatWest’s new chair, Rick Haythornthwaite, said: “I think there’s undoubtedly a perception of more intervention from His Majesty’s Treasury than there really is. Removing that overhang is a value … and I think that can only be good as we think about the future.”

Capital Group’s investment will be welcomed by the Conservative-led UK government, which is rushing to return NatWest to private ownership by 2025-26, and is teeing up a campaign that could lead to a chunk of its stake being sold directly to retail customers as early as this summer.

A Capital Group spokesperson said the firm would not comment on individual companies or holdings. NatWest declined to comment.

The Guardian