Banking on a future

0 Comments | Sunday Herald, The, Oct 3, 1999 | by Ian Fraser

In 1992, HSBC took over the UK's Midland Bank - founded in 1836 but relabelled earlier this year as HSBC as part of a global branding policy. Midland's subsidiary, Samuel Montagu, has been integrated into HSBC Investment Bank Takeover chances: HHHH

FOUNDED in West Yorkshire in 1852, Halifax Building Society converted to a plc two years ago. In recent years, this leading player in the UK mortgage market has gone on a major acquisitions binge, merging with Leeds Permanennt in 1995 and acquiring Clerical Medical in 1996.

Last year, Halifax snatched Birmingham Midshires from the Royal Bank of Scotland in a #780 million deal, further fuelling the Scottish bank's desire for a deal south of the Border.

When Halifax became a bank in 1997, it was valued at #18 billion, but today its market capitalisation has fallen back to #16.5 billion. On conversion Halifax comprehensively reviewed its branch infrastructure, introducing a modern, unintimidating style. Halifax described a pilot scheme, introduced last year, to open around of its 200 branches of its branches on Sundays as a "retaliatory strike".

Should the Halifax proceed with a counter-bid for NatWest, it will have to put earlier plans to acquire Norwich Union on ice. The mortgage bank, which derives 77% of its profits from home loans and deposit-taking is keen to boost profits from 'non-traditional' activities.

Takeover chances: HHH

FORMED in 1944 through the merger of the Abbey Road Building Society and the National Building Society, in 1988 the Abbey National was the first building society to offer its members an interest bearing cheque account.

The following year, Abbey National became the first major building society to convert to a bank. Overnight the number of shareholders in the UK increased from six million to 9.5 million. Its initial market capitalisation was #2 billion.

Today the 'mortgage bank' is worth some #15.4 billion. The change of status has enabled it to embark on a rapid diversification programme. The 1992 acquisition of Scottish Mutual enabled Abbey National to expand into the life insurance market with the launch of Abbey National Life while a 1996 merger with National and Provincial brought the mortgage bank an additional three million customers. Today, half of Abbey National's business comes from 'non- traditional' sectors including consumer credit, life assurance and treasury.

However, the bank has said it will never abandon its mortgage and savings heartland. Any attempted takeover of NatWest could lead to a competition commission inquiry.

Takeover chances: HH

CATCH UP Last week's unexpected bid by Bank of Scotland for NatWest has focused British bankers' minds on the need for consolidation. Following BoS's #21bn share and loan note offer for NatWest, analysts predict that several other banks - including Royal Bank of Scotland - could seek to trump its offer with a higher bid. Meanwhile a bunker mentality has developed at NatWest, which has been likened to the "Department of Social Security, circa 1960"