NatWest and RBS chairmen meet this week

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The Independent Online
ROYAL BANK of Scotland and NatWest are set for informal talks this week as Royal Bank tries again to secure NatWest board backing for its pounds 23bn bid for the English clearer. The talks are chairman-to-chairman and will not involve other board members or advisers.

Viscount Younger, Royal Bank's chairman, is a friend of Sir David Rowland, his opposite number at NatWest, and there are hopes in RBS that the two can this rapport to unblock the position "over a cup of tea".

NatWest has given Royal Bank's offer short shrift since Royal posted its offer document on Thursday. In a statement late on Friday Sir David said that the Royal Bank offer contained "seeds of substantial value destruction".

Royal Bank believes last week's decision by Stephen Byers, the Industry Secretary, clearing its bid has removed one serious obstacle to an agreed deal with NatWest. However, Royal Bank's case has been weakened by its poor share performance, which has substantially reduced the value of its offer since it was tabled more than three weeks ago.

Evidence from the US that bank mergers do not deliver the promised benefits is likely to be the centrepiece of NatWest's defence against Royal Bank. NatWest is expected to post its Royal Bank defence document this week rather than wait until after Christmas. Under the takeover code the document has to be out by 30 December.

NatWest is likely to draw heavily on a report by Deloitte & Touche, the accountants, showing that most US banking mergers fail because banks underestimate the difficulties of integrating IT systems. They also ignore the impact of mergers on employees.

Deloitte is advising Royal Bank in its bid for NatWest and has verified its claim that it can boost pre-tax profits of the combined group by pounds 240m a year by selling more products.

Meanwhile, Bank of Scotland (BoS) is believed to have received a number of expressions of interest for its 56 per cent stake in BankWest, the Australian bank, since appointing Macquarie, the Australian investment bank, to advise it last month.

Most of the interest is believed to come from other Australian banks, although DBS and United Overseas of Singapore, and Hong Kong-based Bank of East Asia may be interested. The pounds 440m the stake may raise could be useful as BoS ponders ways to sweeten its offer for NatWest.