CITY AND SUBURBAN
Nanny was right, and a tartan-clad bogeyman has come to get poor Nat West
CHRISTOPHER FILDES
Al those broken toys in young Natty West's nursery cupboard have come back to haunt him. Nanny always said that if he didn't take care of them, a bogeyman would come and get him, but Nat thought she was making this up. He had always been given new toys and could always come up with new reasons for wanting them. Only last month (as I was saying at the time) he had put his hand up for a life assurance company. It was just what he wanted, even if it was marked at £10 bil- lion, which would make it his most expen- sive toy yet. Some of its predecessors were impulse buys, some stood for hobbies not pursued, some he swapped, some he sold, some he abandoned. From a kit, he assem- bled an investment bank, but the wheels came off, twice. His latest request brought the bogeyman down on him. A terrible tar- tan-clad figure proclaimed that young Nat had been thoroughly spoiled, and should be taken away and taught the discipline that made his opposite numbers north of the border what they were. He would have to learn thrift. His possessions would be sent for auction, and all that would be left of his comfortable home would be the brass plate on the door. Poor little rich boy. His £10- billion toy is still in the shop and there have been tearful partings in the household. There will be more. To stave the bogeyman off, he will have to show that he has put all his extravagant distractions behind him and he will be a model of attention and concen- tration from now on. He deserves the chance, for he is a good fellow at heart, but Nanny is shaking her head. There would be tears before bedtime, she thought, and, as usual, Nanny was right.
Sell me a net
CAST in the role of the tartan terror is Peter Burt, who runs the Bank of Scotland. He is asking NatWest's shareholders to swap their shares for his bank's shares, even though their bank is three times as big. Sell me a net, he says, and I'll pay you in fish. Certainly he and his bank have done better than most, at least until this sum- mer's run-in with the Revd Pat Robertson, the American evangelist who seemed to think that he was dealing with the Bank of Scotland and Gomorrah. When Martin Taylor tired of running Barclays, Mr Burt was, so I learn, the first choice to succeed him. When approached, he said that he would come, but only if his bank came with him. Barclays would need to bid for the Bank of Scotland. The Barclays board jibbed at this and looked elsewhere, but the experience must have given him ideas, as NatWest has discovered.
Fighter Command
ITS defence is in the hands of a team of three from Lloyd's of London, which means that, whatever they know about banking, they know about crisis management. One is Charles Roxburgh, the man from McKin- sey. When Lloyd's first sprang a leak and showed signs of going down with all hands, the Association of Lloyd's Members com- missioned a McKinsey study and then per- suaded Lloyd's to take it on and pay for it. A working party chaired by David Rowland and advised by Mr Roxburgh wrote a revo- lutionary business plan. Its chairman then found himself chairman of Lloyd's and had to make the plan work, if it could. As soon as he had the chance to choose his own chief executive, he chose Ron Sandler, who soon saw that Lloyd's traditional way of doing business — little clubs of punters, forming and re-forming once a year — was doomed. When he told them so and they dug in to defend their right to lose money in their own way, he was ready to move on. This was a bit of luck for his former chair- man, now chairing NatWest. Last week he parted conipany with his chief executive, so whom would he choose to run the busi- ness? Step forward, Mr Sandler. As for Mr Roxburgh, he prefers to stay behind the scenes — but the team that beats this team will know it has been in a fight.
A ride on the cycle
THE last High Street bank to come up for sale was the Midland, seven years ago, and the £4 billion that HSBC paid for it now looks like the snip of the decade. NatWest is priced at £24 billion — but the Midland was bought at the bottom of the banking cycle and by now we must be near the top. Some of the lenders now happily churning out money (on mortgages, for instance) must be feeling the width and not minding the quality. It has been happening in Ameri- ca, too, where the Federal Reserve has been calling for caution and making its point by putting Swot-teams into banks. The Fed thinks that now is the time when the banks make the loans they will come to regret. I dare say the money has been lent already. Lending in haste and repenting at leisure is an old story for bankers. Here at home the banks, NatWest included, show high returns on their shareholders' funds, but this busi- ness can scarcely be as profitable as it looks to all the people who want to be in it.
Howard's End
THE scene was set high in NatWest's impractical tower in the City — another extravagant toy now discarded. A new chair- man, Lord Alexander, had come in to cope with the mess at County NatWest, the would-be investment bank which had drawn down on itself a Department of Trade inquiry and a stack of prosecutions. He had it spring-cleaned and brought in Howard Macdonald, a pugnacious Scot, to run it. Getting it to make money proved harder, as Lord Alexander observed when announcing NatWest's figures. If it did not improve in short order, he said, he would shut it down. At that moment I happened to catch Howard's eye. He bore out P.G. Wode- house's maxim that it is never hard to distin- guish between a Scotsman with a grievance and a ray of sunshine. Soon enough, he was gone, but his business was spared. In retro- spect this was one of NatWest's great missed opportunities. It would have been cheaper and better to have kept the man and scrapped the business. Instead, NatWest poured money and people into it and bought things to tack on to it, but the chairman's first instincts turned out to be right. The whole sad story bears out Sibley's Law, which is (as you may remember) that giving capital to a bank is like giving a gal- lon of beer to a drunk. You know what will become of it, but you can't know which wall he will choose.
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