NatWest has edged another step nearer returning to full privatisation after buying back £1 billion of its shares from the Government.

The taxpayer-backed lender said it bought 263 million shares from the Government at a price of 380.8p each, reducing the Government’s stake to around 11.4% from 14.81%, as at the end of October.

NatWest has now bought back £2.2 billion of state-owned shares so far this year through two rounds of buybacks.

Together with ongoing share sales by the Treasury, this has helped slash the Government’s stake by more than two-thirds since December last year, down from 38%.

Paul Thwaite, chief executive of NatWest Group, said: “This transaction represents another important milestone on the path to full privatisation.

“We believe it is a positive use of capital for the bank and for our shareholders and we are pleased with the sustained momentum in reducing HM Treasury’s stake in NatWest Group throughout this year.”

NatWest received several multibillion-pound bailouts during the financial crisis in 2008 and 2009, leaving the Government with an 84% stake in what was then known as Royal Bank of Scotland.

But the Treasury has been selling down its stake in the lender, which also owns Coutts, as it looks to return the bank to private hands.

In March, the stake fell below 30%, meaning the Government was no longer classed as a controlling shareholder in the lender.

NatWest has been able to accelerate the share sale plan thanks to changes to listing rules in the summer, which removed the 5% cap on the amount of stock that could be bought back in a year.

Labour abandoned previous Conservative plans for a share sale to the public after winning the election in July, which the previous Government had put forward to create a “new generation of retail investors”.