These reductions, designed to shave pounds 525m from the bank's overheads by 2002, include the extra 1,650 jobs announced last month in NatWest's initial rebuttal of the Bank of Scotland bid. They are, however, in addition to the 10,000 the bank is already committed to eliminating as part of the retail transformation programme that began nearly three years ago.
NatWest is also planning to raise its 1999 dividend by 25 per cent to and return pounds 1bn of surplus capital immediately to shareholders through a buyback that to be executed between 20 December and 14 January 2000. A further pounds 1bn will be returned through buybacks next year.
Bank of Scotland's bid for NatWest closes on 18 December, although given that Royal Bank of Scotland is now expected to launch a counterbid today, that date may become redundant.
Dai Davies of Unifi, the banking union, said yesterday: "They have been trying this for three or four years. What they haven't been able to do is increase the income." He said that since the bank announced last month that 1,000 head office and 650 corporate jobs were to go by next year, the most able staff had volunteered for redundancy.
He warned that the bank was cutting back on services it actually needed. "Staff are pretty demoralised. We are looking at all forms of action to defend our staff," he said.
Sir David Rowland, NatWest chairman, admitted that the cost cutting was affecting morale. "Morale is mixed," he said. "Some people are excited about the future because they are being released to think the unthinkable. Others are worried about their jobs."
An incentive programme is being put in place for the top 20 or so managers responsible for delivering improved performance. Payouts will be linked to success in putting NatWest in the top quartile of its peer group in terms of return on equity by 2002. "It is very hard-nosed. If they don't deliver they will get nothing," the chairman said.
Sir David said that while the headline cost-cutting programme being offered was less than the pounds 1bn being offered by Bank of Scotland, he believed the numbers NatWest was proposing were deliverable. Ron Sandler, chief operating officer, said: "We know our cost/income ratio is too high. We will reduce it in ways that are thoroughly thought through, which we know to be realistic and do-able."