NatWest tipped to buy Barings

NatWest Group emerged yesterday as the strong favourite to buy Barings from the administrators. The principal foreign institutions interested appeared to be SBC, UBS, ABN-Amro and Merrill Lynch.

Interest in buying either the whole or part of Barings has been intense ever since the news of its problems started filtering out over the weekend. Many of the bankers called in to try to construct a lifeboat for Barings by the Bank of England also discussed acquiring the bank.

For instance, senior executives of Merrill flew in from New York on Saturday night to take part in the discussions at Barings and at the Bank. According to sources at the talks, NatWest appeared to be the keenest of the domestic clearers.

NatWest has been investing heavily in its investment banking division, NatWest Markets, which has recovered strongly since threatened with closure by the NatWest chairman, Lord Alexander, three years ago. While strong in Europe, NatWest Markets would benefit hugely from Barings' franchise in the booming Far Eastern economies.

SBC has made a name for itself as an aggressive stock market player in London and it is keen to break into what it sees as the City's private club of blue chip institutions. Buying Barings would do just that.

United Asset management, the American group which bought Scottish fund manager Murray Johnstone,.is also understood to be interested in Barings Asset Management.

The problem that the administrators, Ernst & Young, have is that the value of the corporate finance side, Baring Brothers, is limited as the assets - the people - might simply walk out the door.

The fund management side, Baring Asset Management, is more attractive, with £30bn under managmenet. Much of the funds are high quality, including charity funds and far Eastern funds.

However, some of the prices being put on business, such as £800m-plus, are exaggerated, he said.

Bank of England governor Eddie George said yesterday there had been lively interest in buying Barings but noted the case was now in the hands of the administrators who were in charge of the collapsed bank.

"I have been getting phone calls all day saying `who can I get in touch with' and I have been referring them to the administrator," he said.

Nigel Hamiltion, the lead administrator from Ernst & Young, said: "We have been very encouraged by the interest from major UK institutions to buy all or part of the group. There has been a lot of interset from overseas as well - its global."

Mr Hamilton said it was a fair assumption that the administrators would prefer to sell Barings in one go rather than split it up.

"I hope the Barings name continues. It is far too early to speculate."

Everything depends on discovering how great the final losses will be.

The failure to cap the losses deterred one party keen to acquire the bank at a vital moment during the weekend's failed rescue talks, said Mr Hamilton. He refused to say when the final loss would be known.

City headhunters are already circling Baring Brothers ready to pluck star performers from the ailing bank, increasing fears that unless the administrators move quickly, some of the bank's most valuable asets could walk out the door.