Senior executives at RBS, which yesterday began a charm offensive in an attempt to secure a board recommendation from Sir David Rowland, the NatWest chairman, believe that its 11-year relationship with BSCH, one of Europe's most profitable and best connected banks, could be the secret weapon that tips the scales radically in RBS's favour in its three-way battle for NatWest.
RBS's Scottish rival Bank of Scotland launched a hostile takeover bid for NatWest last week. But Bank of Scotland's hopes of flushing out a bid from RBS yesterday proved wildly optimistic. Bankers said that while Sir George Mathewson, the RBS chief executive will have been spitting blood when he learnt of BoS's move on Friday, he will want to avoid being bounced into a premature countermove. They believe a formal offer from RBS for NatWest could be at least 10 days away.
Sir George who yesterday returned to Edinburgh after nearly two days of talks in London with his advisers, Merrill Lynch and Goldman Sachs, is understood to be seeking a meeting with Sir David Rowland later this week in an attempt to persuade him of the merits of an agreed deal with RBS.
As well as being able to offer a higher price, because of the increased scope RBS has for cost savings, the bank hopes to distinguish itself from its Scots rival by a more conciliatory approach.
In contrast to Peter Burt, the BoS chief executive who was scathing about the track-record of the NatWest management when he launched his hostile bid, Sir George is seeking to convince NatWest that he has high regard for its management and is prepared to offer some of the top jobs in the combined group to NatWest staff.
RBS is up against the clear preference of Sir David for HSBC, although it is far from clear than the bank would want to take NatWest unless its management were given a free hand.
RBS also wants time to consult further with BSCH, the former Banco Santander, which holds 9.98 per cent of the Scottish bank and would almost certainly underwrite a share of any takeover bid. Its chairman Emilio Botin and deputy chief executive Juan Inciarte sit on the RBS board and they have been fully appraised of RBS's takeover plans.
The Spanish group has been seeking to forge a pan-European banking alliance with Societe Generale, the French bank that last month evaded the clutches of its domestic rival Banque Nationale de Paris after a gruelling contest. Analysts suggested yesterday that there could be a role for SocGen too in an RBS bid for NatWest.
With a sizeable branch network and commercial lending business in England, RBS has enough of an overlap with NatWest to be able to justify a higher price for it than BoS because of the cost savings it could offer. However, the overlap in the small business market would not be big enough to raise the competition problems that would be posed by a deal between NatWest and its preferred partner HSBC.
NatWest shares rose 9 per cent to 1476p, in anticipation of RBS having to offer at least pounds 15 a share to clinch a deal. Royal Bank of Scotland was up 9 per cent at 1391p, despite having been wrong-footed by the BoS bid. Bank of Scotland was up 6 per cent at 795.5p.
Analysts said there was a danger that these rises indicted the market was getting ahead of itself. "The problem with going for an agreed deal with NatWest is that you leave the existing management in place when what the market really wants is to get rid of them," one analyst commented.