Royal Bank of Scotland in heyday so different to NatWest now

The Herald Scotland

30-04-2025

However, what comes to the front of the mind amid the low-key fanfare around this, particularly from a Scottish perspective, is just how different a bank it is from the institution that was riding high not so long before it became one of the big casualties of the global financial crisis.
Royal Bank of Scotland, which was at that stage known by that name with NatWest as a subsidiary, had to be bailed out in short order in autumn 2008 as the collapse of US investment bank Lehman Brothers unleashed havoc in financial markets.
Trouble had, of course, been brewing in the global financial sector since the summer of 2007.
Royal Bank, with partners Santander and Fortis, completed a huge takeover of Dutch bank ABN Amro in October 2007. This deal appeared to leave the Scottish institution particularly exposed when the global financial crisis got under way in earnest less than a year later.
In the years before the ABN Amro deal, Royal Bank had enjoyed great success.
Notably, it acquired big-four UK bank NatWest in early 2000, after a captivating and protracted bid battle with Bank of Scotland.
Royal Bank then went on to implement the integration of NatWest impressively.
The Scottish bank expanded further internationally, with US-based Charter One among its acquisitions.
Royal Bank had been in the US market for years before this deal, having acquired Rhode Island-based Citizens in 1988.
From a business and economic perspective, much of the 1990s was dominated by worries over whether Scotland would lose its two big clearing banks, Royal Bank of Scotland and Bank of Scotland, to takeover.
Clydesdale Bank was by that time owned by National Australia Bank.
It was Bank of Scotland which kicked off the bid battle for NatWest, in August 1999. NatWest was a perfectly solid bank but was perceived by the City to be inefficient in terms of key metrics such as its cost-to-income ratio. The move by Bank of Scotland at first seemed beyond audacious but made plenty of sense when you worked through the numbers, and there was certainly an appetite in the City for NatWest to be acquired.
Royal Bank, at that stage led by Sir George Mathewson as chief executive with Lord Younger as chairman and Fred Goodwin as deputy chief executive, made its counter-bid for NatWest in late November 1999 and ultimately prevailed, in a close-run contest.
It was undoubtedly a great deal for Scotland, which was for at least a while home to one of the world's largest banks.
Royal Bank dipped its toe into the giant Chinese banking sector around halfway through the first decade of the new millennium through a tie-up with Bank of China, and this was fascinating to watch.
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It seemed for a long time that the big question of the 1990s (and probably also the 1980s) – about whether Scotland could remain home to a major publicly quoted bank – had been answered in a positive way.
Bank of Scotland meanwhile merged with Halifax to form HBOS in 2001. While the enlarged institution did not seem quite so firmly based in Edinburgh as Royal Bank, the head office was in the Scottish capital.
HBOS, of course, was another major casualty of the global financial crisis in autumn 2008, and was acquired by Lloyds TSB in a rescue takeover.
It was a grim time for Royal Bank of Scotland and HBOS, their employees and shareholders, and for corporate Scotland.
What must not be forgotten in all of this is just how quickly the crisis unfolded and the crucial part which Gordon Brown and Alistair Darling, then prime minister and chancellor respectively, played in bailing out Royal Bank and helping sort out the HBOS situation. Their swift action also ensured the stability of the broader UK banking sector amid the mayhem.
Royal Bank was bailed out to the tune of £45.5 billion. Gordon Brown brokered the rescue of HBOS with Lloyds TSB chairman Sir Victor Blank.
For years after the bail out, Royal Bank continued to be known by that name at parent company level.
It was only in 2020 that the name was changed to NatWest Group.
In the years which followed the rescue of Royal Bank, it was difficult to shake the feeling that control was gradually moving from Scotland to London.
However, there was a watershed moment when Alison Rose was appointed as chief executive in late 2019, and her contract stipulated that she would be based in London.
Paul Thwaite, who succeeded Dame Alison in summer 2023, is also based in London.
And it was under Dame Alison's watch that Royal Bank's name was changed to NatWest Group at parent company level.
Dame Alison worked for NatWest at the time of its hostile takeover by Royal Bank in 2000, having joined the London bank as a graduate trainee.
As the return to full private ownership of the institution now known as NatWest Group looms, reflecting on all of this history reinforces the lack of resemblance of this bank to the one that was rescued amid the global financial crisis.
Some people might observe that there is a big positive in this lack of resemblance given the need for Royal Bank to be rescued in autumn 2008 and the scale of the bail-out.
The UK Government stake, which was more than 80% in the wake of the bail-out, fell below 3% this month.
And the financial performance of NatWest Group has improved significantly in recent times, with Mr Thwaite looking to have done a good job so far.
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NatWest Group, of course, still provides valuable and large-scale employment in Scotland, albeit this institution and the other big banks have regularly in recent times announced staff cuts and branch closures.
However, the institution is now very much focused on the UK, with its dull economy. It does not have the international growth potential that Royal Bank of Scotland harnessed, at least for a while, in its heyday.
And what is so sad from a Scottish perspective is that, before the global financial crisis unfolded and certainly ahead of the ABN Amro deal, there was much to be enthusiastic about what had been built at Royal Bank of Scotland.
The answer to that big question of the 1990s is unfortunately crystal clear now: both of the big clearing banks ended up being run from London.