NatWest's £5bn Disposal Programme Faces Criticism from Bank of Scotland

NatWest's plan to embark on a £5bn disposal programme, aimed at returning value to shareholders and demonstrating its worth to investors, has been met with skepticism by Bank of Scotland's chief executive, Peter Burt. Burt labelled the plan as a "completely me-too strategy" that will fail to convince investors, emphasizing that it closely resembles Bank of Scotland's own plan to drastically restructure and return value to shareholders. The proposed disposal list includes Gartmore, Ulster Bank, and Greenwich NatWest, with the proceeds expected to be returned to shareholders through a special dividend worth more than 300p a share.

Key Takeaways:

• Bank of Scotland's chief executive, Peter Burt, criticized NatWest's £5bn disposal programme as a "completely me-too strategy" that will fail to convince investors.
• The disposal list includes Gartmore, Ulster Bank, and Greenwich NatWest, with the proceeds expected to be returned to shareholders through a special dividend worth more than 300p a share.
• The plan is aimed at demonstrating to the City that NatWest is worth at least £15 a share, and that Bank of Scotland's bid, worth £12.64 a share, undervalues the bank.
• Sir David Rowland, NatWest's chairman, plans to bolster the management team by keeping Derek Wanless as chief executive, despite investor pressure to remove him.
• NatWest would need to eliminate 23,000 jobs, roughly half its total workforce, to bring its cost performance up to Bank of Scotland's levels.
• According to NatWest's 1998 annual report, £5bn (68% of revenues) was spent on costs, with a wage bill of £2.6bn, compared to Bank of Scotland's 49% cost ratio.
• Royal Bank of Scotland was in contact with NatWest to secure a board recommendation before launching its bid, and is unlikely to make a formal move before next week.
• Abbey National has also been in discussions with potential advisers to potentially bid for NatWest.

Statistics:

• £5bn: the value of NatWest's proposed disposal programme.
• 300p: the expected value of the special dividend to be returned to shareholders.
• £15: the minimum value that NatWest's share price is expected to reach.
• £12.64: the value of Bank of Scotland's bid for NatWest.
• 68%: the proportion of NatWest's 1998 revenues spent on costs.
• £2.6bn: NatWest's 1998 wage bill.
• 49%: Bank of Scotland's cost ratio.
• 23,000: the number of jobs that NatWest would need to eliminate to match Bank of Scotland's cost performance.
• £7.4bn: NatWest's 1998 revenues.
• £5bn: the proportion of NatWest's 1998 revenues spent on costs.

Sources:

• "Bank of Scotland attacks NatWest's £5bn disposal plan as a copycat move" by The Independent.
• NatWest's 1998 annual report.