Interested in buying into NatWest’s new share offer? “I’ve been through enough,” Alex Brummer says.
Retail offerings of government-owned shares are a rare event in the post-privatization era. So it is not surprising that there has been a growing buzz around what is described as a “tell the master” offer – a throwback to the British Gas sale of 1986 – for part of the government’s 35 per cent stake in NatWest.
The holding is a legacy of a government bailout during the great financial crisis of 2008 when bank cash machines came within minutes of running dry.
Preparations for the 2024 sale, including an offer to private investors, are underway, and barring stock market volatility, the biggest sale of government shares since Royal Mail was privatized a decade ago could be launched in late spring or early summer.
At NatWest’s headquarters in Edinburgh and at Bishopsgate in the city, material is being compiled for the prospectus. Goldman Sachs, which works for government investments in the UK, is on alert and is searching for an agency to lead a marketing campaign targeting national investors. Private investors are expected to be tempted by discounts on the offer price or bonuses for those who retain their shares – or a combination of both.
Although all this may sound exciting as a long-time investor in NatWest – in its former guise of Royal Bank of Scotland – my advice is to stay away altogether.
Flashback: “Tell Sid” ads from the 1986 British Gas sale. Left: Former RBS chairman Fred Goodwin
As a city editor, my self-imposed rule is to keep stocks and never trade. Although I was keen to invest in Britain for the long term, my loyalty to NatWest was an utter financial disaster. My original investment has been destroyed over time due to serial mismanagement.
Worryingly, as a customer for over half a century of one of NatWest’s component banks, service levels have been devastated. The branches have disappeared and will continue to do so. Basic financial services ranging from stock brokerage to document filing have been cancelled. In a desperate effort to cut costs, boost profits and free itself from government control, the bank’s raison d’être is barely discernible.
I will always remember my very different first encounter with our family’s local manager at the District Bank branch in Brighton, which, as a result of a series of mergers, had become part of the National Westminster Bank. Before I went to university, my father, a farmer who owned a retail shop in Hove, accompanied me to the bank to open my first account.
We were ushered into the manager’s office and greeted with a cup of tea and a bourbon biscuit. Forms were completed, a standing order for regular allowance from Michael’s parents was prepared and the account was opened. The basics of writing checks and trying to stay on credit are explained.
It was the beginning of a personal relationship that has helped me through many life events – a joint account after marriage, working abroad for a decade, and returning to London to face a terrible mortgage rate (over 14 per cent) and school fees for three children. children. There were overdrafts and tensions, but successive managers, first at Brighton and later at Putney in south-west London, saw me through the personal traumas.
In a parallel life in financial journalism, I met Fred Goodwin, the energetic chief executive who led the Royal Bank of Scotland, NatWest’s parent company, down a path to ruin. Goodwin embarked on a series of mergers in the US and around the world, culminating in the disastrous £49bn takeover of the Dutch-Belgian financial group ABN AMRO – the largest banking deal ever – in October 2007.
By then, the earthquake, caused by American subprime mortgage loans deteriorating, should have triggered the warnings. US investment bank Bear Stearns was rescued by JP Morgan, and Northern Rock Bank was rescued by the Bank of England after a shameful public run on withdrawing its money from the bank. Goodwin continued to push forward, despite the disastrous decline in the RBS-NatWest share price.
By the spring of 2008, the scale of the miscalculation was clear, and the city regulator asked Fred Goodwin to boost the bank’s capital through a record rights issue to existing shareholders to raise £12 billion. I remember a routine visit to Prudential, which was then one of the City’s major investors, holding a 3 per cent stake in most FTSE 100 companies.
The chief investment officer happily recalls how Goodwin, who had never bothered before, received a personal call to persuade Pru to buy into the rights issue to back the shares. As an existing investor, I decided to subscribe thinking the discounted shares were so cheap that nothing could go wrong.
Example: Michael helped Alex Brummer’s father open an account
That summer, I was invited to a lunch of pigeon salad (I had the vegetarian variant) at the bank’s headquarters in Bishopsgate. Godwin was still confident he could get through the impending crisis, telling me how when he was in London, he stayed in a suite at the Savoy Hotel where an efficient valet service ensured his clothes were cleaned and pressed. Any suggestion that RBS was in difficulty was dismissed.
As the financial crisis gained momentum in 2008, RBS shares fell by 87 percent. On the morning of October 7, as Goodwin was giving an upbeat presentation about the bright future that lay ahead for the bank, shares fell another 35 percent. The hedge funds reeked of blood.
Chairman Tom MacKillop called Chancellor Alistair Darling in a blind panic and the Bank of England secretly made tens of billions of pounds available. By December 2009, the government found itself owning 49 percent of the bank, which remained loss-making for the next decade.
We are expected to believe that the brutal balance sheet downturn and many CEOs later have turned a corner. Maybe, but he has a bad habit of slipping on banana peels. This was the case last year when chief executive Alison Rose was forced out of her position by the board, following government intervention, when she provided personal details about the banking arrangements Brexit veteran Nigel Farage had made with the bank’s private branch. Exclusive Coats.
NatWest is once again in new hands under the able leadership of interim CEO Paul Thwaite and incoming Chairman Rick Haythornthwaite. We are sure that with hands firmly on the plough, the future looks rosy. The era of high interest rates has improved returns. But can anyone be sure that a bank with such a dismal history will ever become a good investment?
As a customer and shareholder, I was a double loser. My shares are worth a fraction of what they were worth at the time of the disastrous rights issue in 2008 and subsequent near-collapse. But I’m equally dismayed by the closing of my local branch, the end of services like safe keeping, and the replacement of the personal touch with a poorly programmed online counseling service called Quora.
It’s not good enough. It has been my long-standing belief that the Government should have sold its stake in NatWest, albeit at a loss, many years ago. But I find the idea of buying into a new retail offering distasteful.
Haven’t all of NatWest’s private shareholders suffered enough already!
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(Signs for translation) Daily Mail