NatWest CEO's Pay Surge Reflects Privatization Milestone – But At What Cost?

The UK government’s impending exit from NatWest, a 17-year chapter marked by a £45.5bn taxpayer-funded bailout, is set to culminate in early 2025. As the Treasury prepares to fully privatize the bank, CEO Paul Thwaite is poised to benefit from a 43% pay rise—raising questions about executive compensation amid lingering losses for public coffers. The dual developments highlight a pivotal moment for NatWest: a symbol of recovery or a cautionary tale of post-crisis governance?

The Government’s Exit: A Drip-Feed Strategy

The Treasury’s stake in NatWest has been methodically reduced since its peak of 84% in 2008. By late 2024, ownership had dropped to under 10%, with plans to fall below 7% by early 2025. Instead of a traditional public share offering, the government opted for a “drip-feed” approach, slowly selling shares into the market to avoid destabilizing the stock.

This strategy has paid off. NatWest’s stock price, which languished near 100p in 2013, surged to 433.1p by late 2024—nearly double its 2023 value. The gains reflect improved profitability, with operating profits hitting £6.2bn in 2024, a 40% increase from the prior year.

Yet the government’s exit won’t recoup its original investment. Taxpayers are expected to recover just £25bn of the £45.5bn bailout, leaving a net loss of £20.5bn. This shortfall underscores the gamble of bailing out a major bank—profits flow back to shareholders, but losses are absorbed by the public.

The CEO’s Pay Rise: Market-Warrior or Moral Hazard?

Paul Thwaite’s proposed pay package—£9.5m if share prices hit 50% gains—has ignited debate. While NatWest argues the increase aligns him with peers like Barclays’ CEO (eligible for up to £14m annually), critics note the bank’s taxpayer-funded origins.

The pay structure is tied to performance:
- Base salary remains at £1.2m, but bonuses can now reach 150% of his base pay (up from 100%).
- A new performance-based share plan allows total compensation (excluding pensions) to hit three times his base salary, or £6.6m.
- The April 2025 AGM will vote on the package, coinciding with the final phase of privatization.

Supporters, including major shareholders like BlackRock, argue the pay is competitive in a sector where talent retention is critical. NatWest’s £450m bonus pool for 2024 (up 25% from 2023) suggests the bank is betting on high performance to justify its costs.

Critics, however, point to the bank’s 3% workforce reduction in 2024 (including 10% cuts in retail roles) as evidence that cost-cutting is prioritized over fair pay distribution.

Investor Takeaways: Privatization’s Double-Edged Sword

For investors, NatWest’s privatization presents opportunities and risks. The bank’s rising stock and strong profitability signal a turnaround, but its reliance on CEO incentives and post-bailout governance are red flags.

• Upside: A fully private NatWest may be more agile, with capital freed from government oversight. The bank’s focus on technology-driven banking (e.g., digital tools for SMEs) could boost margins.
• Downside: The £20.5bn taxpayer loss highlights systemic risks in banking bailouts. If future crises occur, could shareholders be bailed out again?
• Near-Term Catalyst: The AGM’s vote on Thwaite’s pay will test investor sentiment. A rejection could spook markets, while approval may signal confidence in his leadership.

Conclusion: A Recovery, But at a Cost

NatWest’s journey from government-owned relic to privatized bank is a success by most metrics. The stock’s rebound, profit growth, and reduced state ownership all validate the Treasury’s strategy. However, the CEO’s pay raise and the taxpayer’s net loss reveal a darker truth:

The numbers don’t lie.
- Shareholders gain as the stock rises, but the public footed the bill for the bank’s collapse.
- Thwaite’s potential £9.5m payday contrasts starkly with the £20.5bn loss to taxpayers.

Investors should focus on fundamentals: NatWest’s £6.2bn in operating profits and £15.7bn in core capital (surpassing regulatory requirements) suggest resilience. Yet the pay debate underscores a broader issue—whether the banking sector’s recovery truly serves the public interest or merely rewards executives.

As the April AGM looms, markets will decide whether NatWest’s future lies with shareholders or the ghost of 2008.