Cruickshank hints at referral of BoS's £22bn NatWest bid

DON CRUICKSHANK, head of the Government's banking review, is understood to have taken the view that the £22bn bid by Bank of Scotland (BoS) for NatWest, the high-street bank, raises serious competition issues and should be referred to the Competition Commission.

DON CRUICKSHANK, head of the Government's banking review, is understood to have taken the view that the £22bn bid by Bank of Scotland (BoS) for NatWest, the high-street bank, raises serious competition issues and should be referred to the Competition Commission.

Mr Cruickshank is said to have privately told one of the potential bidders for NatWest that the combined group would have 30 per cent of the market for small and medium-sized companies in Britain - enough to justify a competition inquiry.

Although the decision on whether to refer the bid will depend heavily on John Bridgeman, director-general of the Office of Fair Trading, Mr Cruickshank's views will carry weight in the Government.

The banking review was launched 11 months ago with a remit to look into the lack of competition in the small business banking market. Mr Cruickshank has since widened its scope to look at broader issues of structure and regulation.

A referral at this stage would be a huge blow for BoS, which had been counting on Lloyds TSB, Barclays or HSBC not bidding because of competition problems, but assumed its own bid would be waved through.

Bankers say NatWest has almost certainly started lobbying the Government for a referral. An industry source said yesterday: "I think NatWest are going for a referral; that is the only way they are going to remain independent." Senior sources at Royal Bank of Scotland have also expressed similar views within recent days.

Bank of Scotland last night posted its formal offer document to NatWest shareholders. The document reveals that the bid is expected to cost BoS £187.5m, including £105m of stamp duty and fees to its City advisers.

Bankers said they now expect Royal Bank of Scotland, which has been working behind the scenes to secure an agreed deal with NatWest, to table its own formal offer in the next few days to ensure it is not disadvantaged in the event of any bids for NatWest being referred.

Peter Burt, chief executive of Bank of Scotland, took advantage of the opportunity to restate his belief that the bank could cut more than £1bn of costs from NatWest.

NatWest's defence is expected to take the form of a new cost-cutting programme of its own. But Mr Burt yesterday questioned whether NatWest would be able to deliver anything like the cost savings BoS could obtain by its own efforts.

He said that even if the bank managed to raise its existing cost-cutting target from the £300m it is seeking under its five-year Retail Transformation Programme to the £510m BoS believes it can achieve through better management of NatWest's UK retail bank, the remaining £505m BoS would seek to save through eliminating duplication and combining IT systems would not be available to NatWest except through a merger with another bank.

Mr Burt also questioned whether the departure of Derek Wanless, NatWest chief executive, and the appointment of Ron Sandler as chief operating officer would answer City concerns about NatWest's senior management. "I have no doubt about Mr Sandler's abilities," he said. "But if I have a plumbing problem, I get a plumber, not an electrician, no matter how good the electrician might be. What NatWest has at the moment is a plumbing problem."

As for promises by NatWest management to do better, Mr Burt said: "Fine words butter no parsnips."