The Failure of Management of National Westminster Bank - Case Study Example

NatWest could have also responded swiftly and effectively as rivals such as Barclays and Lloyds TBS had done so with the sweeping changes brought about by Internet-enabled financial transactions to the banking industry. By the 1990s, NatWest's traditional bank branch practices such as mortgage and savings faced stiff competition from newcomers such as Egg and Virgin, upstart retailers, and supermarket banks which rode the wave of the financial services revolution. The globalization of financial transactions has also partly driven the mergers in the banking industry - making big domestic banks such as NatWest unable to compete in the new financial landscape.

By the time NatWest made its ill-fated foray into a bancassurance (an untested recipe in the U.K.) via a bid for the insurance and investment firm Legal and General in early September 1999, the market has made a clear judgment that the bank didn't cut the investors' approval of its management. The steep fall in NatWest's stock thereafter only revealed its vulnerability for a takeover. Right until the very end when RBS has won the bid against the BS in February 2000, NatWest refused to give in, insisting that a takeover would not add value to shareholders and would put the much smaller bank in danger of overstretching its finances.

In addition, in its defense document, NatWest's board tried to convince its investors of the poor outcome of previous bank mergers, especially in the U. S. Also, right after the B.S. declared its hostile bid five months earlier, NatWest was considering breaking itself up to make itself more attractive to its shareholders and less attractive to hostile takeovers. It also fired its CEO, Derek Wanless on October 8 after the Legal and General debacle. In December 1999 after the RBS declared its hostile bid, NatWest put up a defense based on the break up its businesses that would release some 6.

5bn pounds to investors - more than enough to compete against the potential cash return contained in the separate bids from the two Scottish banks.