NatWest seeks suitable spouse


Financial Editor

Derek Wanless is trying not to look piqued. But, having been jilted twice in just a few months, NatWest Group's chief executive is not finding it easy. First he tried to push through to the altar with Barings' corporate finance department; then last week he sought to elbow the chosen groom, Swiss Bank Corporation, out of the aisle, and snatch Warburg. In both cases the damsels were in distress, but evidently not sufficiently to accept NatWest's advances.

The market is left wondering what it will try next. For few big banks, in a sector permanently awash with takeover and merger speculation, have been so open about their ambition to become an international investment banking force. In March Mr Wanless said building up NatWest Markets, probably by acquisition, was a priority. This was based on the feeling that the core retail banking side is on a low earnings trajectory, with investment banking viewed as a growth area, despite the miseries of the sector last year.

Mr Wanless gave the impression that his group was looking primarily at New York, where NatWest Markets has a weak presence, for an investment banking acquisition. Suddenly, however, the action switched to London when Barings' collapse offered NatWest the chance to pick up a blue-chip merchant banking operation. In the event, ING, the Dutch bank and insurance group, bought all of Barings. But NatWest's appetite had clearly been whetted, for three months later it made a late try for Warburg too.

Both bids seemed highly opportunistic, but were not without logic. For NatWest still has a patchy UK investment banking business, looking for a step up to the first division. While it has some recognised strengths in securities - NatWest Markets has just scooped three of the four main prizes in the first Reuters ranking of investment analysts - the corporate finance side has never recovered from the ravages of the Blue Arrow debacle. NatWest has found that a strong corporate list on the commercial banking side does not translate into the advisory franchises that bring the lucrative, recurring business.

That is the reason why NatWest was tempted by Barings, and was the key to what it wanted from Warburg. The extent of duplication on the securities side would have caused a real problem, however, necessitating large redundancies - a factor which militated against NatWest's overture.

But snobbery was another powerful reason why NatWest's overtures came to nothing. The public school chaps at Barings and Warburg looked down their long noses at the Manchester grammar school retail banking boys in their polyester suits and said "No". "If NatWest had got near us, half of corporate banking would have walked out," one Warburg director said. All the tribulations of Barings and Warburg had apparently failed to dent the ethos of merchant banking superiority, one of the more unique features of the City in international financial centres. Given that investment banking takeovers are about buying and retaining assets on two legs, this prejudice had to be taken seriously. Ironically, both Barings and Warburg probably found it less disagreeable to capitulate to foreigners than NatWest.

Despite his comparatively fat chequebook, Mr Wanless is not spoilt for City targets. Schroders would be a good fit, with scant securities duplication and a powerful corporate finance reputation. But Schroders is as prejudiced as the others about the attractiveness of mere retail bankers, and the 43 per cent held by the family makes it a difficult target. Kleinwort Benson is still the most obvious. Both banks are seeking to pursue a more limited strategy that does not require large amounts of capital, such as NatWest is offering.

NatWest may find it easier to focus on its original plan to expand in New York. But there may be little time. If the Glass-Steagall Act, keeping apart lending and securities businesses, is largely repealed, as seems likely, then the floodgates will be opened for the US retail banking giants to pour onto Wall Street in a buying spree the likes of which has not been seen for some time. NatWest could well be washed aside.

Market Report, page 27

Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Marketing Manager - B2B, Corporate - City, London

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

Neil Pavier: Commercial Analyst

£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...

Loren Hughes: Financial Accountant

£45,000 - £55,000: Loren Hughes: Are you looking for a new opportunity that wi...

Sheridan Maine: Finance Analyst

Circa £45,000-£50,000 + benefits: Sheridan Maine: Are you a newly qualified ac...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor