NatWest Group PLC (LSE:NWG) shares climbed after it agreed to buy back £1 billion of shares from the government, which analysts saw as bringing forward some of the shareholder distributions it would have made in the next year or so.
HM Treasury's stake in the bank has reduced from 14.2% to about 11.4%, which also takes into account additional share sales by the government into the market under the ongoing trading plan.
"This directed share buyback has come a little sooner than we expected and so brings forward the likely point at which the Government will have fully exited its shareholding," said analyst Gary Greenwood at Shore Capital, he said he assumes "it will be all out by the middle of next year or possibly sooner".
The financial impact for NatWest is to reduce both its share count and CET1 ratio, which Greenwood now expects to end the current financial year around the bottom end of the Group’s 13-14% guidance range.
Most analysts and investors were expecting future shareholder distributions, and Greenwood says this is just likely to be NatWest bringing forward a buyback from later in the year, so he has therefore moderated his share buyback expectations for 2025 and 2026 from £1.25 billion to £750 million in each year.
"Overall, there is only a modest impact on our earnings forecasts through FY24-FY26F."
Shore Capital retained its 'hold' recommendation on NatWest with a current fair value of 380p, which is in line with the current share price and includes a 2.5% haircut to reflect "political risk associated with the Government’s residual shareholding in the Group. Removing this would see the fair value increase to circa 390p, which is not enough to warrant a change in recommendation".