LONDON  - Britain is poised to scrap a milestone sale of shares in NatWest Group to the general public, three sources familiar with the matter said late on Wednesday, after Prime Minister Rishi Sunak called a July general election.

Shares in the lender, which have gained more than 40% this year to date, were trading 1.4% lower on Thursday, as investors waited for official confirmation that the proposed offer would be mothballed until after the July 4 poll.

Chancellor Jeremy Hunt and UK Government Investments, the agency that manages Britain's holding in NatWest, were planning the sale to jumpstart ambitions to promote wider retail ownership of UK stocks.

But the imminent election - taking place sooner than anticipated - places the decision on how to offload the taxpayer's remaining shares in NatWest in the hands of the next government, the sources told Reuters on Wednesday.

The UK finance ministry did not respond to a request for comment from Reuters on Thursday.

Analysts at Peel Hunt said the sale could not take place before an election and it was also unclear whether the Labour Party, which is hotly tipped to lead the next government, would proceed with the initiative.

"Although the UK Government is a passive investor only in NatWest, the presence of the State on the share register in our view is not helpful for the rating of NatWest's shares," they said in a note.

"Whilst this development does not alter our positive view on the outlook for the company and its shares, the uncertainty is modestly unhelpful for NatWest in our view."

As Britain's biggest casualty of the 2008-9 financial crisis, the lender formerly known as Royal Bank of Scotland had been preparing to end what its chairman recently called the "sorry tale" of its partial state ownership.

The bank succumbed to a 46 billion pound ($58 billion) bailout in 2008. Since then, a slew of CEOs have radically transformed NatWest from a sprawling global bank into a tightly-run domestic player, focused on UK household, consumer and business lending.

Some market commentators had cautioned against Hunt’s proposed sale, fearing that bank stocks may not be a wise investment for some inexperienced investors as a cost of living squeeze continues.

The government held just under 27% of the bank's stock as at May 13. ($1 = 0.7866 pounds)

(Reporting By Sinead Cruise and Anousha Sakoui, additional reporting by Danilo Masoni, editing by Elisa Martinuzzi, Amanda Cooper, Elaine Hardcastle)