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Wednesday, 27 October, 1999, 12:58 GMT
NatWest cuts jobs in takeover battle

NatWest and Bank of Scotland graphics The battle over NatWest is heating up

NatWest has announced a further 1,650 job cuts as it launches details of its vigorous defence against the hostile 21bn ($35bn) Bank of Scotland takeover bid.

Battle for Natwest
The job losses are on top of the already announced programme to cut 10,000 retail banking jobs by 2001, which NatWest reaffirmed in its official document.

Of the new cuts, 1000 jobs will be lost from central services and head office over the next couple of months, with 650 more going from corporate banking, including Lombard Asset Finance, by the end of next year.

Union leaders have condemned the cuts. They are seeking immediate talks with the management, demanding that there will be no compulsory redundancies.


The restructuring is part of what NatWest describes as an "on-going strategy to reduce costs and improve profitability".

In its defence document, NatWest urges shareholders to reject the takeover bid, and puts forward the case for remaining independent.

It proposes accelerating cost-cutting programmes and selling off non-core assets, returning the proceeds to shareholders.

NatWest, whose management has been the focus of attack from the Bank of Scotland, questioned the ability of its smaller rival's executives to manage such a large and complex group.

It described the takeover bid as "inadequate" and said it was based on unrealistic assumptions about cost savings.

The defence document, posted to shareholders on Wednesday, says it will focus on the three core franchises of retail, business and private banking customers.

'Hijacking cost savings'

Greenwich NatWest, Ulster Bank, Gartmore and NatWest Equity Partners are to be sold, with surplus capital returned to shareholders.

These and other organisational changes will reduce the number of business units from 13 to five.

NatWest poured scorn on Bank of Scotland's claims regarding cost savings and merger benefits, saying the Edinburgh firm was "attempting to hijack cost savings that belong to NatWest shareholders and claiming unrealistic merger benefits".

It noted that Bank of Scotland was offering "a negligible premium for control" as well as vulnerable paper currency and a substantial reduction in income.

It asserted that the Scottish bank's management team had "no experience of managing a business of the size and complexity of NatWest" as well as a poor acquisition track-record and little experience in cutting costs.

Large-scale cost-cutting

NatWest said the integration of the two financial groups would be a huge undertaking and that, based on a review carried out by Andersen Consulting, the Bank of Scotland's IT cost savings estimate was unlikely to be achieved and entailed significant risks.

It said the further 505m of cost savings Bank of Scotland is claiming from removing overlap and IT costs was "equivalent to 57% of Bank of Scotland's relevant on-going UK cost base".

"This is unrealistic based upon previous bank transactions in the UK, US and Continental Europe," it added.

Bank of Scotland's bid is based on huge cost-cutting, especially in IT, and the disposal of large tranches of NatWest's branch network as well as non-core businesses.

The bid has already forced NatWest to abandon its attempt to take over Legal & General

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See also:
29 Sep 99 |  The Company File
Bank job loss fears grow
04 Oct 99 |  The Company File
NatWest considers break-up

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