Government Ownership of National Westminster Bank - Essay Example

? National Westminster Bank of Affiliation National Westminster Bank National Westminster Bank is popularly referred to as NatWest. In terms of retail and commercial services, this bank is ranked as the largest in the United Kingdom. In 1999, The Royal Bank of Scotland Group made a bid to take over the bank. This bid materialized in 2000 and ever since NatWest has been part and parcel of the Royal Bank of Scotland. When you consider valuation of a banks basing on the assets, the Royal Bank of Scotland Group (RBS) is considered amongst the top 10 largest banks in the globe. NatWest traces its origin to the year 1968 when the National Provincial Bank merged with the Westminster Bank. NatWest has remained one of the “biggest four clearing banks” in the United Kingdom and it has opened over 1,600 branches and 3,400 automated teller machines across the UK (Jones, 2012, p.258). The bank currently has nearly 7.5 million customers and over 850,000 accounts specifically tailored for small businesses. It operates through a subsidiary bank known as Ulster Bank in the republic of Ireland. As per the year 2003 NatWest was a wholly owned subsidiary of the RBS. However, it has currently become the ultimate holding company of the Royal Bank of Scotland Group (RBS). Basing on this, it is evidently cleat that the shareholders, competitors and interest groups of RBS are directly linked to the National Westminster Bank. The government of the United Kingdom acquired majority of the shares of RBS in 2008 to become the majority shareholder of the bank. Currently, the UK government owns over 67% of the ordinary shares floated by the Royal Bank of Scotland Group in the stock market. OWNERSHIP Government Ownership of National Westminster Bank As already stated, NatWest is the main holding company of the Royal Bank of Scotland. This fact implies that whatever happens to Royal Bank of Scotland in terms of ownership and competition has direct implications on the NatWest Bank. In view of this, the government of the United Kingdom began by acquiring 58 percent of the ordinary shares from RBS. It also acquired a host of preference share in November the same year. However, the UK government opted to convert the preference shares to ordinary shares in April 2009 thus pushing up government’s ownership of ordinary shares to whooping 67 percent. The government went further to acquire B shares in December thus making the cumulative government ownership of the RBS Group to stand at 81.15 percent (Waller, 2000, p.31). Stephen Hester is the chief executive officer of the Royal Bank of Scotland, a company which by extension owns the National Westminster Bank. Since the majority of the shareholding comes from the government whose main source of income is the taxpayer’s money, it is also true to say that NatWest is a bank owned by the public (Steiner, 2000, p.18). UK Financial Investments Ltd (UKFI) was then charged with the mandate of overseeing the government’s investments in financial institution including Royal Bank of Scotland Group. In connection to the desire of promoting economic stability and healthy competition in the banking sector, the UK government has given UKFI the duty to manage the orderly but active disposing of government’s shareholding in some of these institutions. Norwich Union is a composite insurer and owns about 1.12 percent of the original shares of NatWest Bank. Before the “takeover” of the company by the Royal Bank of Scotland, the managers of this bank were in full support of the bid presented by the RBS. COMPETITION NatWest, which by extension refers to the Royal Bank of Scotland, faces competition from several banks that include HSBC, Credit Suisse Bank, Barclays Bank and Standard Chartered. About HSBC: It is ranked as the top most banks in the whole world. According to the financial statements of the bank released in the first quarter of 2011, this bank recorded the largest profit of 4,153 billion dollars. It highly trusted in emerging markets such as China. This factor has enabled it to continuously enjoy the economies of scale associated with operating in the fast growing economies. Also, this bank is credited for its effective online account that provides competitive rates. These accounts have no monthly fees or rather minimum balance requirements. Despite of its strengths, HSBC also has a number of weaknesses. The bank has inadequate trained personnel which imply that is less customer-driven. Also, the bank experiences high employee turnover because of redundancy program that reduces staff’s loyalty (Mullineuc & Murinde, 2003, p.326). Barclay’s bank is the other major competitor of NatWest. The bank is widely known and has opened several braches all over the world. Barclays bank enjoys massive promotion as well as publicity since it sponsors the world’s largest and biggest football competition referred to as the Barclays Premier League. This factor gives it an edge over NatWest that struggles to make its presence known in the world by sponsoring sports such as cricket that it is not known that much across the globe. Other competitors include the Suisse Credit Bank and Standard Chartered. All these banks are multinationals and have already consolidated their steps in emerging economies across the Asia and Africa. They equally enjoy economies of scale and have remained key competitors of NatWest by offering customer friendly accounts that have minimum maintenance charges. Unlike NatWest which is majorly owned by the government of the United Kingdom, this other banks are private companies. This means that they do not enjoy as much as protection privileges as NatWest does. However, the government of the United Kingdom intends to promote fair competition by disposing some of its shareholding in NatWest Bank. In conclusion, NatWest stands out as one of the leading banks in the United Kingdom. However, the acquisition of the bank by the Royal Bank of Scotland affected significantly the bank in terms of its presence in the market. This is because it stopped operating independently and instead started operating under the Royal Bank of Scotland. Since the government of the United Kingdom is the majority Shareholder of the bank, NatWest automatically is owned by the government of the United Kingdom. References Jones, Geoffrey. (2012). Banks As Multinationals. London: Routledge. Pg. 258. Merrell, C. & Nelson, F. (2001). Banks merger boosts shares: 5L Edition. The Times, 04/26/2001, p. 1. Mullineuc, A.W., & Murinde, V. (2003). Handbook of International Banking. London: Edward Elgar Publishing. Pg.326. Steiner, R. (2000). NatWest: 1GB Edition, Sunday Times, 04/16/2000, p. 18 Waller, M. (2000). NatWest Bank: 2W Edition. The Times, 09/29/2000, p. 31 Read More