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Journalism of Courage
LONDON, SEPT 25: National Westminster Bank Plc officials prepared for a long weekend of talks with advisers and other banks on Saturday as they battled to find a "white knight" partner and fend off Britain’s biggest hostile bid from Bank of Scotland Plc. Banking sources said NatWest would be most inclined to do a deal with mortgage banks Halifax Plc or Abbey National Plc, which would give NatWest a much needed boost in the home loans market while securing the jobs of senior management. "Clearly there will be phone calls and consultations between various parties throughout the weekend," said one source.
NatWest on Friday rejected the Edinburgh-based bank’s bid, worth 22 billion pounds ($36 billion) at the market close, saying Bank of Scotland was trying to buy it "on the cheap".
But many analysts believe NatWest’s days as an independent bank are numbered. Its only real options may be to find a third party white knight bidder or persuade Bank of Scotland – which is just half its size – to pay more inexchange for a recommendation from the board.
Potential counter-bidders include Royal Bank of Scotland, Bank of Scotland’s arch-rival which earlier this year signalled its acquisitive ambitions when it considered buying Barclays Plc.
A RBS spokesman confirmed on Friday it had been looking at the position of NatWest for some time and was watching the situation very carefully. Britain’s biggest banks, like Lloyds TSB Group Plc and Barclays, would probably be ruled out from bidding for NatWest on competition grounds.
But a merger with converted former building societies Halifax or Abbey National could be on the cards. In either case, NatWest would remain at the helm of most banking operations and relinquish power on mortgages. This would suit Halifax, which needs to diversify its income streams away from its traditional home loans market.
But one industry source said market talk that NatWest was already negotiating a deal with Halifax were wide of the mark. An alternative route for Abbey National wouldbe to pursue insurer and pensions firm Legal & General Group Plc, which NatWest is planning to buy for 10.75 billion pounds.
Abbey National’s Scottish Chief executive Ian Harley, currently in Washington for IMF meetings, might also be interested in a tie-up with the Bank of Scotland or the Royal Bank, said another industry source. "L&G is back in play and this situation throws Bank of Scotland and the Royal Bank into the spotlight. I don’t think Ian Harley will do anything until the situation is totally clear, but he is listening to advice from everybody," said the source.
Foreign banks, too, are likely to be running their slide rules over NatWest. "Every corporate finance team in the world will be saying to every bank in the world come on, this is a one-in-a-lifetime opportunity’," said Robert Fleming banking analyst Hugh Pye.
Bank of Scotland stunned and delighted the market with its David-and-Goliath bid on Friday which NatWest shareholders much preferred to its proposed acquisition of L&G.
TheScottish bank promised to focus on the core banking business and said it would slash costs, with branch floor space set to be cut by 50 per cent. NatWest shares have under performed the sector by some 20 per cent over the last five years following a series of mishaps, including an unsuccessful foray into investment banking.
But they stormed 30 per cent higher to 13.54 pounds on Friday, above the Bank of Scotland offer price, amid talk that a higher offer could emerge.NatWest had a market value of 17.7 billion pounds on Thursday – before the bid – against Bank of Scotland’s 8.9 billion. Bank of Scotland’s offer is 1.6 New Bank of Scotland shares and 1.20 pounds nominal amounts of loan Under the planned takeover, several NatWest businesses would be sold, including fund manager Gartmore, Ulster Bank and investment banking arm Greenwich NatWest.
Asia still facing complex problems: IMF
SINGAPORE: The International Monetary Fund (IMF) today warned that Asia’s crisis-hit economies were still saddledwith complex problems and have a long way to go in their financial restructuring effort. In its second assessment of the response to the Asian financial crisis which erupted in mid-1997, the IMF listed a set of lessons that could be learned from the turmoil, including the need for "prompt and decisive action" to combat banking problems.
"The Asian crisis countries certainly continue to face a complex set of problems," said Stefan Ingves, director of IMF’s monetary and exchange affairs department in a video media conference from Washington for Asian journalists. "The financial restructuring effort still has a way to go, and the final cost to each economy are still not known," he said as the IMF released today the assessment report entitled "Financial sector crisis and restructuring: Lessons from Asia." The 172-page report was a follow-up to the IMF’s initial assessment of the crisis released earlier this year which focused on causes and immediate macro economic policies.
