Barclays scotches NatWest bid talk

Barclays Bank yesterday poured cold water on reports it is considering a bid for its high street rival National Westminster Bank. A spokesman said: "It is pure speculation. As far as I am aware there is no basis of truth in it." Industry observers were also doubtful whether a bid would be made and even more dubious about its prospects of getting past the competition authorities.

NatWest is seen as being vulnerable to a bid after its failed merger approach to Abbey National and the profits warning which accompanied last week's departure of Martin Owen, chief executive of its investment banking arm, NatWest Markets.

But a spokesman said it had not received any approach from Barclays, nor was there pressure from institutional shareholders for further top management changes. There have been mutterings about the position of Lord Alexander, its chairman, and Derek Wanless, chief executive.

A merger between Barclays and NatWest would create a banking colossus equal in size to Lloyds TSB in terms of market capitalisation. But it would face daunting political and regulatory hurdles because of the heavy job losses and branch closures that would inevitably follow and the dominant position the combined group would have in personal banking and corporate lending.

Together, Barclays and NatWest would account for 40 per cent of all personal bank accounts in the UK and over 50 per cent of the market for lending to small and medium-sized businesses. A merger would also bring together the country's two biggest credit card issuers.

For those reasons one banking source said yesterday: "I cannot think this is a serious proposition." It was also pointed out that Martin Taylor, chief executive of Barclays, is not interested in turning the bank into a monolith, believing the quality of its loan book is far more important than its size.

Barclays is capitalised at pounds 17.7bn and has 8 million customers, 85,000 staff, 2,000 branches and total assets of pounds 186bn. NatWest is valued at pounds 12.8bn and has 7.5 million customers, 71,000 staff, just over 1,900 branches and assets of pounds 185bn.

Mr Owen's departure follows the discovery of a pounds 90m hole in NWM's interest rate options business. He is expected to receive a pay-off of about pounds 1m. The trader at the centre of the losses, Kyriacos Papouis, left NatWest last year and four other senior managers have been suspended. Separately there were reports yesterday that NWM's equity business has been put under review.

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