Mark Kleinman is Sky News’ City Editor and the man who gets the Square Mile talking in his weekly City AM column. This week, he tackles a love-in at NatWest, a Budget blow to private healthcare and how cricket went all out
NatWest staff set for Valentine’s Day bonus
The finishing line is in sight. NatWest’s journey through the dark tunnel of taxpayer ownership is about to come to an end, almost 17 years after it began in a frenzy of late-night Treasury meetings overseen by Alistair Darling, the then chancellor, and his boss, Gordon Brown.
Based on the trajectory of share sales under the government’s trading plan – with a full percentage point of stock having been sold in just eight days recently – the state might be out altogether by May. That end-date would come even sooner if Rachel Reeves instructs her officials to launch an institutional placing of NatWest shares. Given the world’s myriad geopolitical uncertainties right now, the discount attached to such a placing might be a justifiable compromise, rather than holding onto the stock for longer in the hope of attracting a marginally higher price.
Either way, BlackRock will, through nothing other than inertia, overtake the government as the bank’s largest shareholder in the coming weeks.
This month’s annual results may deliver a fillip to NatWest’s valuation relative to its peers, given the bank’s limited exposure to the auto finance crisis which has hit lenders including Lloyds Banking Group, Santander UK and Close Brothers. And as I reported at the weekend on Sky News, a sharply higher bonus pool of close to £450m – up roughly 25 per cent on last year’s figure – gives some indication of the likely performance outcomes that chief executive Paul Thwaite will announce at the results on 14 February.
The key question facing Thwaite and the NatWest board is how they use this new-found position of competitive strength to bolster shareholder returns in the coming years. Touted as a potential bidder for Santander UK, the future of which has been the subject of recent speculation, significant M&A may well figure on its agenda.
That, of course, would be rich in irony, coming soon after the taxpayers’ exit from a bailout partly triggered by the ill-fated acquisition of a big chunk of ABN Amro and Fred Goodwin’s more broadly rapacious instincts. NatWest’s major investors might, I suspect, be willing to give its new leadership team the benefit of any doubt.
Spire sharpens post-Budget cost-cutting drive
If you thought it was only retailers and hospitality businesses smarting from Rachel Reeves’ Budget tax hikes, think again. Word reaches me that the private hospital operator Spire Healthcare has been busily drawing up plans to mitigate the impact of the chancellor’s £25bn employers’ national insurance raid.
Banking sources suggest that the company, which has a market value of about £1bn, has been evaluating a range of options, including seeking greater procurement efficiencies as well as sizeable job cuts. However, the latter does not currently appear to be on the cards, according to Spire – despite the fact that Reeves’s raid will add hundreds of pounds per year to the company’s employment cost-base.
“Like all employers Spire Healthcare will be looking to address the cost impact of the rise in employer national insurance and other inflationary cost pressures,” a Spire Healthcare spokesperson told me.
“Spire has a well-publicised efficiency programme driven by digitalisation and improved ways of working which both serves to reduce costs and improve patient experience. As part of that programme Spire is always looking at ways to accelerate the business and patient benefits.
The spokesperson added that an update on its business plans would be provided alongside the company’s annual results in early March.
The implications of a swingeing headcount reduction in a business which counts the NHS as its single-biggest customer are obvious; but Spire’s board is also required to act in the interests of its shareholders, as well as other stakeholders – and extracting other cost-savings from a business already regarded as being run as efficiently as most operators in the sector will be a challenge for Justin Ash, its chief executive. Keeping an eye on Spire’s workforce number will be an intriguing exercise in the coming months.
Oval Invincibles find the Hundred boundary harder to clear
Smashed for six. A record total. Cleared the boundary. There are plenty of cricketing metaphors applicable to the auction of the eight Hundred franchises being conducted by the England and Wales Cricket Board and its advisers.
In the end, the proceeds will surpass the ECB’s original (deliberately lowball?) forecast of an overall £350m valuation for the eight franchises by some distance. But like a fifth day Test match pitch, there’s more to it than meets the eye.
Take the Oval Invincibles auction: at first glance, the headline valuation of £123m – with £60m being paid to the ECB for its 49 per cent stake – looked reasonable. As a multiple of EBITDA, it is said to be an eye-watering 77.5. Digging deeper, though, suggests a more mediocre outcome. The reserve price for the franchise was £120m, with one of the three shortlisted bidders – CVC Capital Partners –deciding not to bid. Moreover, the consortium of technology titans which included Microsoft’s Satya Nadella and Google’s Sundar Pichai opted not to compete vigorously with Mukesh Ambani’s Mumbai Indians, instead electing to focus its firepower on the following day’s London Spirit auction – for which it paid an eyewatering valuation of £295m.
Like a run chase that falls short due to bad weather, the sense of missed opportunity might be more pervasive at Surrey CCC HQ than anywhere else.