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Banking industry

Royal Bank of Scotland Sparks Speculation with Merger Notice Filing

Strategic Insights

— 1 min read

The Royal Bank of Scotland has filed a "merger notice" with the Office of Fair Trading (OFT), sparking speculation about its intentions to make a bid for National Westminster Bank. The move comes as the OFT has yet to submit its advice to the Department of Trade and Industry on Bank of Scotland's (BoS) offer for NatWest. The first deadline for Trade and Industry Secretary Stephen Byers to rule on whether BoS's offer raises competition concerns is this Friday.

Key Takeaways:

  • The Royal Bank of Scotland has filed a merger notice with the OFT, indicating its potential interest in making a bid for National Westminster Bank.
  • The OFT has not yet submitted its advice to the Department of Trade and Industry on BoS's offer for NatWest, with a deadline of this Friday for a decision.
  • The potential merger would raise competition concerns, particularly regarding market share of lending to small and medium-sized businesses.
  • NatWest currently holds a 24% market share in this segment, while BoS has 3%.
  • City banking analysts estimate a 70-80% chance of Royal Bank bidding for NatWest.
  • Banco Santander Central Hispano (BSCH), with a 9.64% stake in RBS, is expected to be involved in the offer and could increase its shareholding to up to 29.9% in return for an injection of capital.
  • Analysts estimate that RBS could go up to $20 a share, or a total value of $33 billion, while BoS's current offer values NatWest at $29 billion.
  • NatWest's shares rose 4p to $14.46p, while RBS fell 15p to $13.95p.

Statistics:

  • NatWest's current market share in lending to small and medium-sized businesses is 24%.
  • BoS's market share in this segment is 3%.
  • The potential merger would create a combined market share of 27% (24% + 3%).
  • The OFT's merger pre-notification rules promise a decision on whether a merger goes to the Competition Commission within 20 working days, potentially extendable by a further 15 days.
  • RBS's current stake in BSCH is 3.34%, while BSCH's stake in RBS is 9.64%.
  • Estimated values for NatWest's shares range from $13.39p (BoS's current offer) to $17.60p (BoS's potential offer) and $20 (RBS's potential bid).

Sources:

  • Royal Bank of Scotland
  • Office of Fair Trading
  • Department of Trade and Industry
  • Bank of Scotland
  • National Westminster Bank
  • Banco Santander Central Hispano
  • Schroders merchant bank
  • City banking analysts

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