Spirited defence could be enough to ensure independence of NatWest

National Westminster Bank's chances of surviving two hostile takeover bids have risen in recent weeks because of growing doubts about hostile bank mergers and NatWest's moves to revamp its management. NatWest owns Ulster Bank and has said it plans to sell or float the Irish subsidiary. NatWest's unexpected appointment of senior Lloyds TSB Group executive Mr Gordon Pell yesterday as its UK banking chief executive may not be the knockout blow that guarantees NatWest its independence.

But it has reinforced perceptions that it is fighting a spirited defence and could pull off a comeback that was seen as virtually impossible just six weeks ago.

Analysts and fund managers gave NatWest little or no hope of survival when Bank of Scotland mounted its surprise £22 billion sterling (€57.5 billion) takeover bid in late September, but they now see a much higher chance of survival.

Royal Bank of Scotland, which came in with a hostile counterbid in late November, is still seen as favourite to win because it is seen as having strong backers that can help it raise the cash element in its bid, analysts say.

But that advantage is now marginal at best and NatWest has won ground at the expense of Royal Bank in particular, they say, citing fears that a hostile takeover may destroy value and NatWest's moves to boost its management.

"It's a good move that will improve their chances of survival," Commerzbank analyst Mr James Alexander said of Mr Pell's appointment, describing NatWest's chances of avoiding takeover now at 50/50. "I think they could survive actually," he said.

He saw Bank of Scotland's chances at 30 per cent and Royal Bank at 20 per cent, given what he said was Bank of Scotland's stronger core banking operations.

Bank of Scotland has also said that it would sell Ulster but Royal Bank has said that if its bid succeeds it will hold on to the Irish banking group.

Opinion is mixed over the size of the boost given to Natwest by Mr Pell's appointment, but most agree it is positive for NatWest and a blow for Lloyds.

Mr Pell (49) was Lloyds TSB's executive director for retail distribution and had been allocated new responsibilities in a management reshuffle in December.

He was in charge of Lloyds' e-commerce plans and the retail branch network.

But some analysts said the reshuffle may have disguised a slight sidelining for Mr Pell that prompted him to look for better opportunities elsewhere.