Royal Bank of Scotland Faces Counterbid Dilemma

In a surprising turn of events, Royal Bank of Scotland must now consider a counterbid for National Westminster Bank after its Edinburgh rival, Bank of Scotland, launched a surprise attack. This development comes on the heels of Royal Bank's earlier aborted bid for Barclays, which may leave it with a reputation for indecision if it fails to act. The key question now is whether Royal Bank can cut costs through a combination with NatWest, considering the potential overlap and regulatory hurdles.

Key Takeaways:

• Royal Bank of Scotland is faced with the possibility of a counterbid for National Westminster Bank after Bank of Scotland's surprise attack.
• The bank's earlier bid for Barclays was abandoned, which may harm its reputation if it fails to make a move.
• The overlap between Royal Bank's and NatWest's networks is a double-edged sword, presenting both opportunities for cost-cutting and concerns over competition authorities.
• Bank of Scotland has a better record as a cost-stripper, which may give it an edge in terms of cost-cutting potential.
• The two Scottish banks can likely cut costs to roughly the same extent, but the risk of lengthy investigation and potential asset disposal complicates Royal Bank's decision.
• Bank of Scotland's offer is not at the highest price, giving Royal Bank an opportunity to enter the bidding without harming its own investors.

Statistics:

• Royal Bank of Scotland's network overlaps with NatWest's to a greater extent than Bank of Scotland's does.
• Bank of Scotland has a better record as a cost-stripper, with a proven track record of successfully cutting costs.
• The potential overlap between Royal Bank's and NatWest's networks raises concerns over competition authorities, potentially leading to lengthy investigation and/or asset disposal.
• The two Scottish banks can likely cut costs to roughly the same extent, but the risk of regulatory hurdles and potential costs make the decision complicated.

Sources:

• "Royal Bank of Scotland 'Must' Counter Rivals' Bid for NatWest" by an unknown author, Financial Times, 1999.