NatWest chiefs under pressure as sale of investment banking arm leaves pounds 637m hole

The position of NatWest's top management looked increasingly precarious last night after it emerged that the sale of large parts of NatWest Markets would leave a pounds 637m hole in the accounts this year. Lea Paterson examines the group's failure to become a main force in investment banking.

National Westminster Bank is to split the equities business of NatWest Markets, its investment banking arm, between Frankfurt-based Deutsche Morgan Grenfell (DMG) and the US Bankers' Trust in a pounds 179m deal.

The deal, which will leave NatWest nursing more than more pounds 600m in trading losses, provisions and other charges, dismayed the City and led to renewed doubts about the future of its chairman Lord Alexander and chief executive Derek Wanless.

Mr Wanlesssaid: "We have been unsuccessful in developing this business and have therefore taken the very tough decision to effect an orderly exit as being in the best interests of shareholders and NatWest as a whole."

DMG, the investment banking arm of Germany's Deutsche Bank, is to buy NatWest's Asian and US equity derivatives business for pounds 50m. Bankers' Trust, which snapped up NatWest's European cash equities for pounds 129m. NatWest is to retain "a proportion of its UK equity derivatives book", which will be wound down. "It's the bit that neither Bankers' nor DMG wanted," commented one insider.

Both DMG and Bankers' got a good deal, according to City analysts, who had previously put a price tag of between pounds 300m and pounds 400m on the two sets of businesses. One commented: "One had hoped NatWest might have done rather better with this sale".

Despite City criticism, Mr Wanless said he was pleased with the sale. He said: "The fact that we have achieved more than net asset value is good. We are satisfied with the price". NatWest achieved a surplus of pounds 55m over net asset value for the businesses, but analysts pointed out that this was before a goodwill adjustment of pounds 65m. One commented: "There is a lot of accounting flexibility in these things".

Last month, Barclays sold parts of BZW, its investment banking arm, for pounds 50m less than book value.

NatWest expects its investment banking activities to lose pounds 637m in the year to December, it was revealed yesterday. NatWest Markets is predicted to make an operating loss of pounds 210m, and NatWest is also set to take a pounds 270m restructuring charge. In addition, the group has made a pounds 77m provision for options mispricing discovered last March and an pounds 80 post-Budget adjustment to finance lease receivables. John Leonard, banking analyst at Salomon Brothers said: "The disappointing element [of the announcement] is the large loss and the size of restructuring charge".

Mr Wanless attributed the poor performance of NatWest Markets to two factors, its high cost base and the uncertainty surrounding the future of investment banking at NatWest. He emphasised that the losses did not, in the main, stem from positions taken by NatWest's traders. But Chip Kruger, chief executive of NatWest Markets admitted: "That is not to say that individual trades didn't lose money in October and November."

The City was highly critical yesterday of the way in which NatWest Markets has been managed in recent months. One analyst called NatWest's failure to set out a clear investment banking strategy "a major disaster". Another said that it raised questions over the future of both Mr Wanless and Lord Alexander, NatWest's chairman. One commented: "I would not be surprised to see them go, but management tend to cling on as long as they can in these situations".

Mr Wanless yesterday said he was "committed" to the remainder of the businesses within NatWest Markets. But some analysts doubt ed whether NatWest's substantial corporate advisory business could survive without its equity operations.

One said: "They've started unravelling the business and it's difficult to see where it's going to stop."

NatWest also announced yesterday that its US cash equities division is to close. The bank has also had "a number of approaches regarding its Australian investment banking operations", and is "in discussions" about the sale of its Asia cash equities businesses.

Outlook, page 25

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Arts and Entertainment
Tom DeLonge, Travis Barker and Mark Hoppus of Blink-182 pictured in 2011.
musicBassist Mark Hoppus and drummer Travis Barker say Tom Delonge is 'disrespectful and ungrateful'
Sport
football
Arts and Entertainment
Olivia Colman and David Tennant star in 'Broadchurch'
tvBroadchurch series 2, episode 4, review - contains spoilers
Sport
cyclingDisgraced cycling star says people will soon forgive his actions
News
Britain's Prince Philip attends a Garden Party at Buckingham Palace in London
people
Arts and Entertainment
Ed Sheeran will play three sell-out gigs at Wembley Stadium in July
music
News
i100
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
News
Lena Dunham posing for an official portrait at Sundance 2015
people
Arts and Entertainment
Under the skin: Sarah Kane in May 1998
theatreThe story behind a new season of Sarah Kane plays
Arts and Entertainment
Preening: Johnny Depp in 'Mortdecai'
filmMortdecai becomes actor's fifth consecutive box office bomb
Sport
Bradford City's reward for their memorable win over Chelsea is a trip to face either Sunderland or Fulham (Getty)
football
News
Lars Andersen took up archery in his mid thirties
video
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Guru Careers: In-House / Internal Recruiter

£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Day In a Page

Woman who was sent to three Nazi death camps describes how she escaped the gas chamber

Auschwitz liberation 70th anniversary

Woman sent to three Nazi death camps describes surviving gas chamber
DSK, Dodo the Pimp, and the Carlton Hotel

The inside track on France's trial of the year

Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
As provocative now as they ever were

Sarah Kane season

Why her plays are as provocative now as when they were written
Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

Murder of Japanese hostage has grim echoes of another killing

Japanese mood was against what was seen as irresponsible trips to a vicious war zone
Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea