UK Government Investments (UKGI), the state-owned company that controls the shares, said the they were priced at 190 pence, 4% below Monday's closing price of 197 pence.

NatWest has been majority state-owned following a 45 billion-pound bailout in 2008 during the financial crisis. The sale crystallises a further hefty loss of around 1.8 billion for taxpayers, with shares well below the 502 pence bailout level.

The move edges the bank closer to private ownership, reducing the government's holding from 60% previously.

The government's last sale of stock to outside investors was in 2018, although NatWest directly bought back 1.1 billion pound of shares last month to reduce the state's holding from 62%.

NatWest shares fell around 4% in early trading to around the latest sale price. They are also below the 2018 sale price of 271 pence a share.

The government said it continued to keep all options and timings under review for future sales.

NatWest's stock price has more than doubled since hitting a low of 90.5 pence in September, as optimism has built about prospects for Britain's economic recovery from the COVID-19 pandemic.

NatWest, formerly Royal Bank of Scotland, has long argued it is unrealistic to expect a profit on the bank's rescue, which was needed to stabilise Britain's financial system.

The bookrunners on the sale were Barclays, Citigroup, Goldman Sachs and Morgan Stanley. Rothschild & Co is acting as adviser to UKGI.

Two months ago, Britain's financial regulator said it had started a criminal action against NatWest over allegations it failed to detect suspicious activity by a customer depositing nearly 400 million pounds over five years, mostly in cash.

($1 = 0.7084 pounds)

(Reporting by Iain Withers; Editing by Rachel Armstrong, Jason Neely and Pravin Char)