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  • Writer's picturePeter Smith

THURSDAY 14th OCTOBER 1999: Bank of Scotland Formally Bids

I hold a briefing for my team to go through the organisational changes and just generally update them. I tell a few key people about the timing for closing Cheadle and ask them to think about plans, contingency and so on. I have to formally tell B, who runs the place and reports to me, that we are closing it, and ask him also to consider timing. He takes it better than I expected and has some sensible views on the phasing of the different elements; for instance, he thinks we can close the envelope production unit sooner rather than later. He is very professional about the whole thing, which makes my job easier.

Bank of Scotland finally issues the official bid document. Apart from the detailed stuff that has to be included legally, there is not a lot more than they announced a week ago. Over the last ten years, £100 invested in BoS has grown to £1515; invested in NatWest it would only be £745. Their cost/income ratio is under 50% and falling; ours is 68% and fairly static. (This is arguably an unfair measure, as NatWest is a very different business to BoS. But, hey, since when did details matter?) NatWest has not grown either at the rate BoS has; that is a fair comparison I would say. The overall message is that BoS is a focused, efficient, low cost provider, with experienced managers ready to come in and sort out NatWest.

There are a few interesting comments from a purchasing point of view. They claim to be "committed to progressive outsourcing of non-core activities", and also say that as soon as the offer becomes unconditional, they will institute a cost saving programme with a number of aspects, including "instituting stringent procurement policies." They also within the overall cost reductions in Information Technology include "leveraging greater purchasing power across the combined group," which I would have to agree is an obvious potential benefit.

At first sight, a couple of areas look a bit strange. The IT savings come partly from migrating to a common set of software applications, but there isn't much detail on this, and it is certainly not an easy thing to do. And they talk about creating smaller retail outlets to serve customer demand better, and to save money.

But I would have thought that the cost of, say, shutting down a big old Victorian NatWest branch in the High Street of Bramblebury Town, and opening up a smart little branch in the new shopping centre, would be horrendously expensive. Other than in cities, where they make good bars, no-one wants old branch buildings, and the rent on a new shopping centre outlet is higher because of competition from retailers. It doesn't stack up to my mind.

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