16 June, 2010

Great Britain Bank Mergers & Acquisitions (NatWest Group)

Photo: NatWest's office at the heart of the City (of London) at No. 1 Princes Street. NatWest has been a subsidiary of the Royal Bank of Scotland Group since 2000.

[Limited-coverage page] NatWest has been a subsidiary of the Royal Bank of Scotland Group since 2000. Events after 2000 are listed under the Royal Bank of Scotland Group's page.

National Westminster Bank plc (NatWest Group)

The creation of National Westminster Bank was announced in 1968 when two of Britain's then Big Five, National Provincial Bank and Westminster Bank, agreed to merge. When the combination was completed in 1970, the resulting bank was the 5th largest in the world. In 2000, however, NatWest was taken over by the Royal Bank of Scotland Group but it continues to operate under its own identity in England and Wales.

National Provincial Bank Ltd.

In 1833, Thomas Joplin and other investors founded the National Provincial Bank of England after five years of preparation. The bank’s mandate was to provide banking services in England and Wales outside of London, so it could issue its own banknotes. At the time, the Bank of England enjoyed a monopoly in issuing banknotes within a 65-mile perimeter of London. National Provincial did maintain a purely administrative head office in the British capital.

From 1834 onwards, branches were opened in Gloucester, Birmingham, Boston and many other towns. By 1865, through the acquisitions of many private and joint-stock rivals, the bank already operated 122 branches across England and Wales. Soon it became clear that London was too important a market for the bank to avoid and a London branch was opened, requiring the bank to surrender its privilege to issue banknotes.

In 1880, National Provincial restructured itself as a limited liability company and modified its name to the National Provincial Bank of England Ltd. By 1900, further expansion increased the number of branches to around 200.

In 1917, National Provincial acquired 50% of Lloyds Bank (France) Ltd., renaming it Lloyds & National Provincial Foreign Bank Ltd. in 1919, with branches in London, France, Belgium and Switzerland. In 1918, National Provincial merged with the Union of London & Smiths Bank Ltd., which had more than 230 branches. The new bank with 700 branches adopted the cumbersome name of National Provincial & Union Bank of England Ltd. In 1920, the bank acquired London private bank Coutts & Co., which was founded in 1692 and today continues to offer wealth management services under its own brand as part of the Royal Bank of Scotland Group.

In 1924, the bank’s name was simplified to National Provincial Bank Ltd. It continued to expand during the inter-war years and after World War II by acquiring other banks domestically. In 1954, it divested its stake in Lloyds & National Provincial Foreign Bank back to Lloyds Bank. National Provincial acquired the Isle of Man Bank Ltd. in 1961, which continues to trade under its own name today. In 1962, National Provincial took over District Bank, the seventh largest London clearing bank with a substantial branch network in Northern England and the northern Midlands counties. National Provincial kept the District Bank identity until its merger with Westminster Bank in 1970. At the time of the amalgamation, National Provincial and District Bank together had a network of about 2,200 branches.

Westminster Bank Ltd.

Westminster Bank can trace its roots to the London & Westminster Bank and the London & County Bank. London & Westminster was the older of the two and was officially founded in 1834 in the City. As its name suggested, the bank’s main activities focused on central London but it also acted as the City agent to various country and foreign banks. By 1905, the bank had a network of 35 branches.

London & County Bank was created in 1836 in Southwark as the Surrey, Kent & Sussex Banking Company. Southwark was a borough in the county of Surrey at the time, but is now part of London. Just one year after its founding, the bank moved its head office to the City and in 1839, adopted the name London & County Banking Co. The bank grew rapidly during the second half of the 19th century through a series of acquisitions. By 1875, London & County had a network of 150 branches in London and Southern England, the most of any British bank.

In 1909, London & County and London & Westminster decided to combine into the London, County & Westminster Bank. London & County’s network of more than 260 branches in London and south and east of London was merged with London & Westminster’s 37 London branches. In 1917, the bank expanded outside of southern England and acquired Belfast-based Ulster Bank, gaining 170 branches in Ireland. Ulster Bank had been weakened by the political and social upheavals gripping Ireland following the Easter Rising of 1916. In 1918, National Provincial merged with Parr’s Bank of Warrington and London (with 235 full branches) to become the London County Westminster & Parr’s Bank. The new entity now operated 700 branches.

London County Westminster & Parr’s sensibly shortened its name to Westminster Bank in 1923. Throughout the 1920s, Westminster acquired more banks in Nottinghamshire, Yorkshire and Guernsey. By 1968, Westminster had a network of 1,400 branches across Britain, Ireland and Northern Ireland.

National Westminster Bank Ltd.

In 1968, National Provincial Bank (including its subsidiary District Bank) and Westminster Bank (including subsidiaries Isle of Man Bank and Ulster Bank) agreed to amalgamate into the National Westminster Bank. The new bank adopted the three arrow-heads logo, which is still in use today. When the merger was completed in 1970, the bank had 3,600 branches, though branch consolidation reduced that number to 3,200 by 1979.

In 1972, National Westminster introduced Access, the bank’s first credit card. Throughout the 1970s, the bank actively participated in financing oil exploration in the North Sea, as well as created an international division. In 1979, National Westminster bought National Bank of North America, which had 141 branches in New York State, marking the bank’s first retail network in the United States.

Soon after the British financial services industry was deregulated in 1986, National Westminster entered the securities business by buying up stock-brokers and underwriters. In 1988, the bank’s U.S. unit acquired New Jersey’s First Jersey National Corp. Following this purchase, National Westminster Bancorp’s network totalled 340 branches in New York and New Jersey.

In 1991, a major restructuring programme saw the bank’s various private banking businesses combining under the Coutts & Co. brand. Coutts & Co. had been part of National Provincial Bank since 1920. Then in 1992, NatWest Markets was created to handle the group’s corporate and investment banking products.

In 1993, the bank launched NatWest Life to embark on the life insurance business. NatWest sold its American retail bank National Westminster Bancorp to Fleet Financial in 1995 for GBP 2.3-billion (USD $3.6-billion) to focus on its British operations. In the same year, the name NatWest Group was officially adopted.

NatWest’s fortune took a dramatic turn in 1999 that eventually culminated in the loss of its independence. The events all began in September 1999 when NatWest announced a friendly deal to acquire U.K. insurer and unit trust (mutual fund) manager Legal & General plc for GBP 10.7-billion. To many analysts and institutional shareholders, however, swallowing up and integrating Legal & General was the last distraction NatWest needed when the bank’s core business was already underperforming. NatWest's share prices promptly tumbled by 26% over the next few weeks.

Two days after NatWest's share collapse, on 1999-09-24, the Bank of Scotland launched a surprise GBP 21.0-billion (USD $34.3-billion) hostile bid to take over NatWest.

By early October 1999, NatWest’s CEO Derek Wanless had lost the board of directors’ confidence and resigned. The bank also abandoned its offer for Legal & General. Throughout October, NatWest announced cost-cutting plans to eliminate 1,650 jobs and to sell off Ulster Bank, fund management arm Gartmore, NatWest Equity Partners and Greenwich NatWest in the hope of persuading its shareholders to vote against selling out to the Bank of Scotland.

NatWest’s struggle to remain independent became even more complicated on 1999-11-29, when the Royal Bank of Scotland (RBS) joined the foray and announced its own hostile bid for the embattled bank.

Throughout December and January (2000), both Bank of Scotland and RBS jockeyed for shareholders’ support (from both their own and those of NatWest) and raised their respective bids to over GBP 25.6-billion (USD $41.7-billion).

In early February, RBS secured a GBP 500-million financing from its own institutional shareholder Spanish banking giant Banco Santander Central Hispano (now Banco Santander). With the additional cash infusion from BSCH, RBS was able to increase the cash portion of its bid for NatWest, and won over the major shareholders of NatWest.

On 2000-02-11, NatWest finally gave up its fight and recommended its shareholders to accept the offer from RBS. By this time however, the value of the offer had fallen back to GBP 21.0-billion due to a fall in RBS share prices. What began as a seemingly ordinary takeover bid for Legal & General ended up with NatWest losing its own autonomy.

Interestingly, both Bank of Scotland and RBS were rather smaller than NatWest. So even RBS in the end "took over" NatWest in a cash-and-share purchase, the former shareholders of NatWest actually ended up owning 62% of the newly-enlarged Royal Bank of Scotland Group, with the former RBS shareholders owning the remaining 38%.

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