Battle for NatWest resumes as DTI clears pounds 22bn Bank of Scotland bid

THE BATTLE for National Westminster Bank resumes in earnest today following the Government's decision not to refer Bank of Scotland's pounds 22bn hostile bid to the Competition Commission.

Shares in NatWest soared 8.8 per cent to 1,471p following the decision, easing City fears that the Government, which last year launched a review of the banking sector, would use the bid battle as a pretext for a wider review of the banking sector.

The decision could clear the way both for a higher bid for NatWest by Bank of Scotland, and for Royal Bank of Scotland (RBS) to enter the fray, even though Stephen Byers, the Industry Secretary, has given himself another 11 days at least to rule separately on an RBS bid.

Under the revised 60-day bid timetable, which resumed at day 37 last night, NatWest has less than 48 hours to publish its final defence document. This, which could be out as early as today but will probably go out tomorrow, is likely to set a firm timetable for the pounds 5bn disposal programme and flesh out the bank's commitment to cut more jobs. It is also the last chance for NatWest to publish its profit forecast and pledge to return capital to shareholders.

Mr Byers said he had been advised by the Office of Fair Trading that the bid did not raise any competition concerns. "The banking sector is of central importance, both in its own right and for the economy as a whole... I am persuaded that the merger will not have any adverse effect on competition. The parties have branch networks that are concentrated in different areas of the country, and they face significant competition from other institutions over a range of their services," he said.

Mr Byers had not been expected to rule until next week, but is believed to have brought forward his decision as he is flies to Seattle today on official business. There was relief at Bank of Scotland, as a referral would have effectively halted its bid in its tracks. The bank, which has been exploring its options to raise finance, now has a week to prepare to increase its offer.

Mr Byers is still considering a request for clearance from RBS for a bid for NatWest. Analysts believe it is unlikely that this would be referred, although given the greater overlap between RBS's English branches and those of NatWest, a referral cannot be ruled out. The OFT is due to complete its deliberations on the RBS request by 6 December. Under the revised timetable RBS has until 8 December to declare its hand.

RBS is believed better placed to justify a price close to the 1,600p NatWest shareholders are believed to be seeking. Angel Cortesegui, chief executive of BSCH of Spain, said it would back an RBS bid for NatWest. "If Royal Bank decides to do something, we will support it. We will always act in Britain through Royal Bank and not directly. It is their decision," he said.

Tom Rayner, bank analyst at SG Securities, said he believed NatWest would now seek an agreed deal with RBS. "I don't think Sir David Rowland [NatWest chairman] wants to end his career spending 10 years trying to sort NatWest out. He just wants to get the best value for NatWest shareholders."

Earlier yesterday the heads of information technology at Bank of Scotland and NatWest clashed over the Scottish bank's claims to be able to save more than pounds 290m through eliminating IT duplication.

Outlook, page 23

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