Ulster Bank upbeat as NatWest admits defeat to RBS

Britain's third-largest bank, National Westminster, conceded defeat yesterday in its bid to stay independent in the face of a takeover bid from Royal Bank of Scotland (RBS). NatWest's Irish subsidiary, Ulster Bank, said the takeover was good news for Ulster Bank and should allow it to grow more aggressively in the future, according to chief executive, Mr Martin Wilson.

The decision of the NatWest board to bow to the takeover removes much of the uncertainty which has surrounded its Irish subsidiary for many months. RBS has stated it intends to retain it within the enlarged group. Speaking to The Irish Times yesterday, Mr Wilson said he was "very excited" about becoming part of Royal Bank of Scotland and believed it would be a good deal for Ulster Bank's employees.

"We are going to be part of one of the largest financial institutions in Europe and one which has a track record of concentrating on growth rather than being a zealous cost cutter. That has to be good news for the bank."

The Royal Bank of Scotland/ NatWest group will be the seventh largest financial institution in Europe. It had a more diverse range of products and a more sophisticated information technology platform than NatWest and should yield many benefits for Ulster Bank, Mr Wilson said. He suggested that RBS was more acquisitive than NatWest and was highly supportive of growth opportunities for its subsidiaries.

"There are opportunities for Ulster Bank to expand. We can take encouragement from what has happened at Royal Bank's other subsidiaries, such as Citizens Bank in the US. It has been very acquisitive, adding two new businesses to its operations in the last six months." Mr Wilson said RBS's clear intention to retain Ulster Bank was a vote of confidence in the strength of its operations and augured well for its future within the enlarged group. "It has recognised that Ulster Bank is a strong franchise and the business can add value to the group."

At the moment, Mr Wilson said there was no question that RBS would seek to sell any of the component parts of Ulster Bank, apart from those already on the market - Ulster Bank Investment Managers (UBIM) and Ulster Bank Investment Services (UBIS). He refused to comment on the level of interest in those businesses but suggested a sale could be completed within two months.

"Royal Bank will have to look at Ulster Bank in its totality when it gets its feet under the table but the only businesses which are up for sale at the moment are UBIM and UBIS."

When Bank of Scotland first launched its hostile bid for NatWest five months ago, NatWest declared that it would sell Ulster Bank to raise funds to defend the bid.

Bank of Scotland also planned to sell off the Irish bank but lost out in the race for NatWest to its Scottish rival, RBS.

All the major Irish financial institutions had closely examined Ulster Bank and Irish Life & Permanent combined with Bank of Ireland to launch a joint bid while AIB also registered its interest in buying the bank.

Ulster Bank senior management had been advocating an alternative strategy whereby NatWest would have floated off Ulster as a separate entity on the Dublin and London markets rather than sell it to another financial institution.

At the death, NatWest has advised its shareholders to accept RBS's £21 billion sterling (€34 billion) bid.

After almost five months of vehemently rejecting the two rival bids as risky and inadequate, NatWest finally threw in the towel as its major shareholders pledged to vote for RBS.

RBS effectively won the fight over the last three days when three of NatWest's five largest shareholders said they would support its bid. The surrender of rival bidder Bank of Scotland on Thursday settled the matter.

NatWest said it had become clear that the majority of NatWest's institutional shareholders intended to support RBS and that the offer would achieve acceptances in excess of 50 per cent when the deadline for the offers expired next Monday.

"Accordingly, the board now advises those shareholders who have not done so to accept the offer by the Royal Bank of Scotland. We congratulate Royal Bank and look forward to helping it ensure the success of the new organisation," chairman Sir David Rowland said.

Royal Bank has been the favourite to win for some time because of strong backing from its largest shareholder, Spain's BSCH, and a larger overlap of branches with NatWest south of the Scottish border.

NatWest's board had strongly opposed both bids, arguing they overestimated the merger benefits, underestimated the integration risks and created the potential for destroying shareholder value.