...and is it BZW next?

The mounting problems at NatWest have focused attention on its high-street rivals and their different approaches to the volatile and so far relatively unrewarding area of investment banking. The evidence suggests sticking to unglamorous but predictable retail banking has been the better course, writes Tom Stevenson.

Lloyds TSB flirted with the idea of growing its own investment bank in the 1980s but took the view it would never be able to compete with the well-capitalised American players and withdrew. It has rewarded its investors with a 30 per cent return on capital and a share price that has doubled over the past year.

Barclays has shared NatWest's goal of becoming a meaningful global participant and has failed to make a better fist of it through BZW than its rival. Institutional investors in both companies have called for a withdrawal from investment banking and the redirection of the capital tied up in that business to the more steadily profitable high-street banking core.

Analysts believe NatWest has been more aggressive in its pursuit of its global ambitions. BZW has avoided the embarrassment of NatWest's heavy derivatives loss and has spent less than the pounds 1bn its rival has splashed out on acquisitions.

There is thought to be less pressure on Barclays because its other businesses are in better shape than NatWest's.