INVESTORS are predicted to show strong interest in the UK Government’s proposed sale of its shares in NatWest Group, as top brass at the Royal Bank of Scotland owner look to draw a line under the self-inflicted turmoil which engulfed the lender in 2023 in the year ahead.

Shares in the state-backed lender began to gradually recover towards the end of last year, after the price fell sharply in the wake of the Nigel Farage “de-banking” scandal that cost former boss Dame Alison Rose her job in July, and fell further when it downgraded expectations of interest margins in October.

Dame Alison resigned after admitting that she was the source of a BBC story concerning the financial affairs of Mr Farage, which focused on the decision to close the accounts of the former UKIP leader held with Coutts, the NatWest-owned private bank. It led to claims Mr Farage had been “de-banked” because of his political views.

Chancellor of the Exchequer Jeremy Hunt announced plans to sell taxpayers’ near-40% stake in the bank in the Autumn Statement in November.

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Asked whether the Rose controversy would impact the public’s appetite to buy shares in NatWest, John Moore, senior investment manager at RBC Brewin Dolphin in Edinburgh, said: “There is a point in time where you have to think about how you exit that sort of investment. Otherwise, 15 years on, it becomes something that is part of the furniture. It was meant to be a short-term, confidence-boosting, temporary situation. It is understandable that a full exit remains on the table because from a common-sense point of view, that is right.

“Will they [shares] attract demand? I think they will, because I think the valuation is low, and the valuation is low because the business has got to prove itself a little bit, in all honesty. That is what will attract investors.

“In terms of how a stock market business proves itself… you need to get some degree of certainty and some degree of clarity in terms of how this business progresses. The company pays quite a high level of dividend – that is helpful in an interest rate environment that is likely to fall a little bit.”

Mr Moore added: “Overseas institutions are probably short of ownership of many UK stocks. It has been a one-way bet, with money going out the way, but more recently there has been a bit of interest in some of these financials. And I think it is worthwhile highlighting that the European banks have performed pretty well this year [2023] in contrast to the UK banks. The UK banks remain at a valuation discount to their European peers.”

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An independent report commissioned by NatWest found the bank was responsible for a “number of failings” in its treatment of Mr Farage, which saw details of his account status leaked to the media, “as well as failures in how communicated with him and in relation to client confidentiality”.

But the bank said the report, delivered by prominent law firm Travers Smith, confirmed that the decision to close the accounts had been lawful and made in accordance with the relevant bank policies and processes.

Mr Farage dismissed the findings of report as a “whitewash” and “laughable”.

Mr Moore said: “I think most people’s thoughts were it was just an incredible situation. But what I would say is that it was symptomatic of the business regrettably not being in the right place. They should have been best-placed to capitalise on change, but they spent most of the year shooting themselves in the foot.

“When you are trying to build momentum, recovery, self-help you need to build trust and you need to build your brand. I think, widely, that episode was seen as something that was brand-negative, not to touch upon the specifics of the individuals involved. Just simply it was a news story that really should not have surfaced.”

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He added: “If you are looking back, that in a strange way was the epitome of some of those traditional high street banks shooting themselves in the foot over the last year. But I think you learn lessons from periods like that. I am sure NatWest will learn a lot of lessons from that.”

NatWest appointed Paul Thwaite as interim chief executive following the departure of Dame Alison, with a new chairman coming in board in April, when Richard Haythornthwaite succeeds Sir Howard Davies.

Michael Hewson, chief market analyst at CMC Markets, said he expects Mr Thwaite to be given the job on a permanent basis, providing the bank’s share price continues to improve. “I don’t think they are looking for anyone else,” he said.

Mr Hewson, who expressed the view that outgoing NatWest chairman Sir Howard Davies would also have resigned following the Rose affair had he not already announced he will be stepping down in April, added: “As for NatWest share price performance I think it should continue to improve as long as Paul Thwaite is able to show he has put the Alison Rose issue in the past and he has addressed any governance issues.”

NatWest remains 37.97% owned by UK taxpayers, a legacy of its £45.5 billion bail-out by the UK Government during the financial crisis of 2008/ 2009.