Bank chiefs get personal in NatWest bid battle

Several months ago Sir George Mathewson, the Royal Bank of Scotland chief executive, and Peter Burt, the Bank of Scotland chief executive, met in Edinburgh to discuss the idea of carving up NatWest between them. The discussions went round and round until Sir George turned to Peter Burt and said: "It is the classic prisoners' dilemma. We ought to find some way of doing this together. But you know as well as I do that it is inevitable that we are going to end up bidding against each other."

Several months ago Sir George Mathewson, the Royal Bank of Scotland chief executive, and Peter Burt, the Bank of Scotland chief executive, met in Edinburgh to discuss the idea of carving up NatWest between them. The discussions went round and round until Sir George turned to Peter Burt and said: "It is the classic prisoners' dilemma. We ought to find some way of doing this together. But you know as well as I do that it is inevitable that we are going to end up bidding against each other."

Sir George had already discussed the idea of a break-up bid for NatWest with Sir Brian Pitman, chairman of LloydsTSB, and had started to settle on the idea of going it alone for NatWest after attempts earlier this year to engineer an agreed bid with Barclays had run into the sand.

To those familiar with the Scottish scene, the idea of the two setting aside personal rivalry to co-operate on a NatWest bid was always fanciful. Now theyare competing for the same prize, control of the UK's third-largest bank, it has not taken long for the latent clash of personalities to rear its ugly head.

Yesterday at a conference call to put the case that the Bank of Scotland's bid was still worth more to shareholders than the rival bid tabled on Monday by RBS, Peter Burt ignored the advice of his minders and launched a personal attack on Sir George and his deputy Fred Goodwin whom he dismisses for never having managed a UK bank. "Royal do not have the solid quality of management that we have. The bank even had to go outside to find Fred Goodwin," he said.

He went on to criticise the accounting behind RBS annual results, which on Monday showed profits rising 20 per cent to more than £1.2bn, as "racey", before indulging in an ad hominem aside about Sir George's notoriously prickly character: "I don't think there is much doubt in Scotland as to which management is easier to do business with," he said.

The fact that it was Mr Burt who fired the first shot has allowed Sir George to claim the moral high ground. On Monday Sir George made much of his friendship with Gavin Masterton, Mr Burt's number two.

But scratch the surface and is apparent that the feelings of contempt are entirely mutual. Clearly for both Mr Burt and Sir George the idea of the other returning to Edinburgh with the scalp of an English bank was not easy to stomach. Equally, if one or the other Scots bank were to stumble and end up being taken over, there would be little sympathy in the other camp.

Sir George, for all his success in shaking up the Royal Bank, clearly feels that he has never quite got the recognition he deserves in the Square Mile. The fact that Peter Burt has long been seen in the City as the better banker and that the "Bank of" has enjoyed a higher share rating that the Royal has also rankled. There was irritation too that Mr Burt was approached about the chief executive job at Barclays when Barclays was refusing to give Sir George's idea of a friendly merger the time of day.

Sir George and his entourage still believe that much of Bank of Scotland's reputation stems not from Peter Burt but from Sir Bruce Pattullo, the conservative Scots banker who ruled the bank with a rod of iron. They have done their best to encourage the belief that since Sir Bruce retired more than 18 months ago, and Mr Burt has had freer rein, things have started to go wrong.

When Peter Burt found himself in hot water over the Pat Robertson affair earlier this year, the men from the Royal where doing their best behind the scenes to stir up trouble, and could scarcely hide their glee when the deal with the controversial American preacher collapsed over the summer.

Since the Bank of Scotland went hostile in September, RBS has been sniping about Bank of Scotland's lack of sophistication and ability to cope with a business of the complexity of NatWest. "Sir Bruce would never have let him do this," is a frequent refrain. Sir George, who has long been thought of as unpredictable and mercurial, has clearly enjoyed the role reversal of the past few weeks.

RBS has learnt from experience over Barclays. Lord Younger, the RBS chairman, was, say bankers, called in by Eddie George, the Governor of the Bank of England, and told gently that RBS's soapbox tactics over Barclays were not on.

Sir George said on Monday: "There is a different emotional relationship between NatWest and the City from that between Barclays and the City. The feeling with Barclays was that they should be given time to sort themselves out. With NatWest that is not the case."

The strong personal dimension to this contest has not been lost on Sir David Rowland, the NatWest chairman who in an unguarded moment said last week: "There is a lot of Edinburgh egos in this."

For the moment, the rivalry between the two Scots is playing wholly to his advantage.