NatWest chairman courts the big mortgage banks

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The Independent Online
NATIONAL Westminster Bank appeared to invite the UK's largest mortgage banks to enter the bid battle for NatWest yesterday, when its chairman hinted that such a deal would make more sense than a tie-up with either Royal Bank of Scotland or Bank of Scotland (BoS).

Sir David Rowland appeared to be giving the green light to a mortgage bank bid when he was reported as saying: "The closest merger benefits for us would come from a mortgage bank... they would be our best partners." NatWest later tried to backtrack from the remarks, saying Sir David had been commenting generally on banking consolidation.

But analysts said the comments could be interpreted as a "come-on" to mortgage banks such as Halifax and Abbey National. Others said they were an attempt to put pressure on Royal Bank, whose pounds 25bn bid was turned down last week.

While a deal between a high-street clearer such as NatWest and a mortgage bank might make sense in theory, it is unclear if any of the major players are interested. Abbey National held talks with NatWest two years ago but is not thought to be interested any longer. It has released Warburg Dillon Read as its financial adviser and Warburg has joined the Royal Bank of Scotland team.

However, Abbey National would be interested in Gartmore and NatWest Equity Partners, two of the subsidiaries that have been put up for sale by NatWest as part of its defence strategy. Halifax would not comment, although it too is thought not to be interested in entering the fray.

Sir David Rowland has reportedly suggested that there are too many big, old-fashioned banks in Britain, and that the sector would benefit from consolidation.

Analysts and legal experts yesterday suggested that Royal Bank of Scotland's bid for NatWest is likely to be cleared by regulators, even though it may be asked to slim its branch overlap in parts of Britain. Some analysts have been concerned that the heavy branch concentration of a combined group in the north-west of England could pose competition problems for the bid.

NatWest Bank shares closed 15p lower at 1,412p, Royal Bank shares fell 28p to 1,162p and Bank of Scotland shares rose 28.5p to 749.5p.