NatWest shares hit record high on rumours of strike
Wednesday 02 July 1997
Barclays, Commerzbank of Germany and the Royal Bank of Scotland were all mentioned as possible bidders though most analysts dismissed takeover talk as little more than rumour.
"No one is selling, so any rumour is making the stock fly," said one analyst.
NatWest declined to comment on the speculation, as did Barclays and Commerzbank. One analyst said Commerzbank was too small to make a tilt at NatWest as it was only half its size. Royal Bank of Scotland would be in an even weaker position as it is around a third the size of NatWest.
Some analysts said Prudential could be interested in NatWest as it remained keen to expand in banking while NatWest was interested in expanding in life assurance. However, any of the big four UK clearing banks would face regulatory problems as a takeover would give a merged clearer such a big share in retail banking. NatWest would be valued as a "going concern", meaning a bidder would have to take a goodwill write-off of up to pounds 7bn. Analysts said this would be too much even for a giant like HSBC.
Shares in other banks such as Lloyds TSB, Bank of Scotland and Royal Bank of Scotland all rose strongly yesterday.
Analysts were also dismissive about a possible link-up between NatWest Markets and BZW, the investment banking arms of NatWest and Barclays respectively. They said management would struggle to integrate the two without damaging profitability and losing key staff. "It would take unbelievable management skills to pull it off," one analyst said.
The share surge follows a decision on Monday by the Takeover Panel to turn down a request by NatWest to force Barclays to make a statement about any bid plans. Alistair Defriez, the panel's director-general, said he saw no reason to intervene.
NatWest approached Abbey National about a possible link-up earlier this year and there has been speculation since about a link with another financial institution. NatWest was plunged into a financial crisis last month when it issued a profits warning and the head of its investment banking arm resigned. This followed the discovery of a mis-pricing of interest rate options which cost the bank pounds 77m.
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