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  • Peter Smith

MONDAY 24TH JANUARY 2000 - A Big Day for the Bid Defence


Today is day 39 of the process, the last day we are allowed to publish any new information (I think) in terms of the bid. The "top 150" senior team is invited to Gibson Hall at 5pm for a briefing. The chairman, Sir David, stands up and welcomes us; "Here we are at day 39 again...again...again"


There is an element of deja vu about all this. But, he says, come what may we are going to have a party on day 60 whatever happens. Well, that has the potential to be either a really great party or an occasion to forget! He explains that our defence document was published at 11am, followed by a press briefing at 12, then a more formal analysts meeting at 2.30p.m. The problem with the analysts meeting is that most of them work for companies who are in some way involved with or advising either NatWest or the bidders, hence they are not allowed (by stock exchange rules) to ask questions.


"So they sit there like puddings!" complains Sir David.


David praises Richard Delbridge for the great work he and finance have done to get us into better shape; then thanks Ron for his contribution over the last few months. To complete his top team, he introduces Gordon Pell, who joins formally on Feb 1st- but Brian Pitman is letting him spend time with us even though Lloyds are still paying his salary. This sounds very odd; it is strange the things that happen at the top level that I would not dream of doing at lower management levels. If one of my team announces they are joining Barclays, or Royal Sun Alliance, (who in particular seem to recruit exclusively from my team), I can't see me saying, fine, why don't you start immediately, don't worry, I'll keep paying your salary for a while....


The Chairman continues, saying that Gordon joining is a real vote of confidence in our future. It is noticeable that Bernard Horn is not praised or even mentioned as part of the top team. I feel like putting my hand up and saying, "excuse me, haven't you forgotten someone?" Perhaps luckily, Bernard is away in the States this week. I don't think he has quite got onto Sir David's wavelength somehow.


David goes through the presentation that they used today with the analysts. There is a lot of focus on value and on future revenue growth. 4 of the 5 businesses in the "new NW" have grown well, but Retail has been disappointing. However, with the implementation of the RTP almost complete, we are ready for a take off into higher growth.


This may be true, but RTP is behind schedule in some areas, which is one of the main reasons we are in this mess. Because of my peoples' involvement, we also know that a number of apparently completed projects have been "de-scoped" to ensure they come in on time and budget. Hence the new processes that might have helped achieve growth are not really in place. But the other non-Retail parts of NW are all doing very well. If we do lose, someone is going to pick up some excellent businesses.


We will be returning more cash to shareholders- around £3.5 million, including the re-purchase of £1.5bn of shares in March, plus the capital from divestment. Cash is king- that's what the big shareholders want. They are looking to get out of boring old sectors, realise the cash and invest in the dynamic, growing, sexy, tumescent, throbbing, tingling, vibrant markets such as Telecoms and dot.com businesses. (No doubt this will all change again within six months.) The business sales to generate the cash are all on stream; they are good businesses but they have higher value to someone else.


Then Ron takes over. We have declared provisional profits of £2.3 Billion, around 10- 15% up on last year, depending how you measure it. Headcount reductions are on plan (of course, that depends on which plan - I'm sure we have slipped on the plans put forward when RTP was first launched), and are being properly managed, unlike the bidders' planned staff reductions that are very risky. We are into innovative new sales initiatives like "managing local markets", which identifies better local customer trends and opportunities, and exciting new approaches to the long-term savings market, which has huge possibilities. We will also be looking to grow lending quickly, which we have not done recently while our competitors have powered forwards. Of course, we will achieve this without taking a more risky approach. (As a mathematician and statistician, this sounds like a bit of a logical impossibility, but hey, I'm not a banker...)


The NW.com launch has gone well. We have 65,000 customers already with 1700 a day signing on now for the Internet banking service, which from what I have seen does look genuinely impressive. Our link with Yahoo! (negotiated by my excellent senior manager who specialises in these things) is a real market advantage.


Sir David sums up. The offers are still inadequate and risky. Nothing has changed, and we can deliver far more ourselves. The value in the company belongs to NW shareholders and we can release it without outside help.


The questions from the floor are not particularly interesting today, except when someone asks about the cost/income ratio, traditionally NW's weakest performance measure compared with the competition. David and Ron waffle unconvincingly about return on capital being a better measure, don't really have all the data yet.... Clearly the cost/income news is not something they want to shout about at the moment, and we won't have to make it public until the full results come out on Feb 29th; by which time of course our fate will have been determined.


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