NatWest seeks suitable spouse

BY JOHN EISENHAMMER

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
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

£16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

Day In a Page

The long walk west: they fled war in Syria, only to get held up in Hungary – now hundreds of refugees have set off on foot for Austria

They fled war in Syria...

...only to get stuck and sidetracked in Hungary
From The Prisoner to Mad Men, elaborate title sequences are one of the keys to a great TV series

Title sequences: From The Prisoner to Mad Men

Elaborate title sequences are one of the keys to a great TV series. But why does the art form have such a chequered history?
Giorgio Armani Beauty's fabric-inspired foundations: Get back to basics this autumn

Giorgio Armani Beauty's foundations

Sumptuous fabrics meet luscious cosmetics for this elegant look
From stowaways to Operation Stack: Life in a transcontinental lorry cab

Life from the inside of a trucker's cab

From stowaways to Operation Stack, it's a challenging time to be a trucker heading to and from the Continent
Kelis interview: The songwriter and sauce-maker on cooking for Pharrell and crying over potatoes

Kelis interview

The singer and sauce-maker on cooking for Pharrell
Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea