Royal Bank of Scotland's Takeover Bid for NatWest faces Crucial Decision

Strategic Insights -

City analysts and competition authorities are watching closely as the Royal Bank of Scotland's bid for National Westminster is set to receive a verdict from the UK government by the end of the week. The official report into the bid has been passed to Trade Secretary Stephen Byers, who has until 29 December to decide whether to refer the merger for full scrutiny by the Competition Commission. The decision comes amidst concerns about potential antitrust issues and the impact on small and medium-sized business lending in the UK.

Key Takeaways:

  • The Office of Fair Trading (OFT) has sent its recommendation on the RBS bid to Trade Secretary Stephen Byers, who has until 29 December to give his judgment.
  • City analysts pointed out that Byers waved through the rival Bank of Scotland bid for NatWest only three days after receiving an OFT recommendation, suggesting a similar decision may be made for RBS.
  • RBS's bid has been under scrutiny due to its overlap with NatWest operations, particularly in north-west England, although the bank has pledged not to close branches as a result of the merger.
  • Analysts suggest that Byers's decision will be influenced by the similarities between RBS's bid and BoS's, as well as the potential impact on small and medium-sized business lending.
  • Byers highlighted the reduced concern over mergers of traditional banks due to the emergence of new direct and internet banking competitors during the BoS clearance process.
  • Royal Bank of Scotland's annual report shows that group chief executive Sir George Mathewson saw his overall pay package increase by 11% to $836,000 in the year to end-September.
  • Deputy chief executive Fred Goodwin's pay package was $592,000 in his first full year, while the bank's highest-paid employee, Larry Fish, saw his package fall 9% to $2.9 million.

Statistics:

  • RBS's takeover bid includes a basic salary of $487,000 for Sir George Mathewson, with a performance-related element of $285,000.
  • Goodwin's pay package included a basic salary of $382,000 and a performance-related bonus of $190,000.
  • Larry Fish's package included a basic salary of $494,000 and a performance-related element of $2.39 million.
  • RBS has a 27% share of the small and medium-sized business lending market.

Sources:

  • "Royal Bank's £22bn bid for NatWest on the verge of clearance", The Times.
  • "RBS annual report shows Mathewson's pay jumped 11%", Bloomberg.
  • "Trade Secretary given verdict on NatWest takeover", BBC News.