Barclays gives sore foot a rest

By Jason Nisse
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The Independent Online

It was almost two years ago that Derek Wanless - then chief executive of NatWest Group - realised he was not going to be able to secure an agreement with Abbey National about a merger. The snub from Baker Street started the train of events that led to Barclays buying the Woolwich for £5.4m.

It was almost two years ago that Derek Wanless - then chief executive of NatWest Group - realised he was not going to be able to secure an agreement with Abbey National about a merger. The snub from Baker Street started the train of events that led to Barclays buying the Woolwich for £5.4m.

The genial Geordie only lasted another 14 months in the hot seat at NatWest and is now consigned to history as one of the many executives who came to grief at a British clearing bank. But history is written by the winners and the fact that Mr Wanless knew damn well what was the right strategy for NatWest, and for reasons largely beyond his control was unable to execute it, means little now.

Had NatWest merged with Abbey it would have been able to do what Lloyds TSB has done with Cheltenham & Gloucester and Barclays is now planning to do with Woolwich. It would have created a subsidiary brand to sell mortgages and savings as well as tempting the sort of customer who has little trust for the traditional "big four" banks. NatWest is now owned by Royal Bank of Scotland, already a "funky" brand in England, so this dual branding structure is well established.

Barclays - which is so used to shooting itself in the foot that Matt Barrett must wear bullet-proof socks - benefited from this, as it was Royal Bank's target before it went after NatWest. It has long been looking for just such a deal as the one it has done with Woolwich.

When he was interviewed in this paper in February, Canada's answer to Gay Byrne signalled that Barclays wanted to buy a mortgage bank - or as he described them, "sub-scale players with narrow product ranges". Had he not run into so much trouble with branch closures, internet security and the like, I'm sure this deal would have been secured much sooner.

Woolwich, of course, brings Barclays more than just a mortgage business. It also has an internet banking side - called Open Plan - which allows Barclays to sell a trendy new online service to people who usually would avoid Barclays like the plague, while still offering its own online service to its existing customers. This avoids the IF or Cahoot problem, where Halifax and Abbey National, respectively, find themselves cannibalising the few current account holders they already have in order to grow the internet business.

All this adds up to Woolwich being quite a good purchase for Barclays - even if it is paying a pretty full price for it. The City is being stuffy about this acquisition, partly because Barclays' presentation of the deal on Friday was downright dreadful (comments like "bring back Martin Taylor" were heard), partly because of the price and partly because it is uncertain about Barclays' management structure.

The plan is for Woolwich's John Stewart to become deputy chief executive, in charge of the retail business. John Varley, Barclays' retail chief, will become "group director, integration" and will "lead an interdisciplinary functional team". This looks like a job with about a year's shelf life. Will Barclays find another task for the talented Mr Varley - who just happens to be married to a member of one of the Barclays founding families - or will we be seeing another large pay-off for a director without a role?

Though the investors may moan, they will vote this deal through. This is largely because there is little alternative. No one is going to bid for Barclays, as Bank of Scotland did when NatWest's deal with Legal & General looked rocky, and no one is going to bid for Woolwich, as Barclays is already paying top dollar. Also, with the possible exception of HSBC, which appears not to like the UK retail market, no one has quite the same gap in which to slot Woolwich as exists at Barclays.

This deal is far from perfect. But at least it is progress.

Barclays - of course - could not get through this bid without one blast of the Luger at the public relations paw. Giving its reasons for the bid, the bank says that "the new Barclays retail portfolio will offer extended wallet and product penetration". What its customers think of "extended wallet penetration" I can't imagine, except that they can hardly expect it to be a comfortable experience.

* j.nisse@independent.co.uk

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