small change

0 Comments | Sunday Herald, The, Nov 21, 1999 | by teresa hunter

THE pantomime season has started a little early this year I see, and it goes something like this. Once upon a time there was a small town building society called the Bradford & Bingley which was forced by its ugly sisters to leave the security of its little world and seek fame and fortune on the stock market.

Having set off down this lonely road, it last week bravely moved to the front of the stage with very important announcements. It is going to give all its members #1000 worth of shares later next year. You shall go to the ball.

But that's the whole point about pantomime isn't it? The audience knows all along, that what's going on down stage is a hollow sham. The true story lies well "it's behind you".

Can there be anyone in Britain who thinks that Bradford & Bingley is going to make it to flotation, when the rest of the banking sector is going through the greatest turmoil and consolidation we have seen for decades?

If its important little announcement last week hadn't seemed so pathetic it would have been laughable. But that's always the bitter- sweet role played by the cinderella characters who have no control over their destiny.

The really interesting plot is being woven right here in Scotland, and the ending is almost as predictable as that of the Christmas shows. For all the drama, tears and laughter, the twists and turns, one thing we can be sure of, barring accidents is that Scotland's two big banks ought to emerge significantly bigger and stronger before the final curtain falls.

And against this background, the battle for NatWest is almost a sub-plot. The true story is about the carve up of the entire sector. It is a huge mistake to see the action in terms of a struggle between the Bank of Scotland and Royal Bank to gain control of this second- rate institution.

Indeed the irony is that the one who actually gets NatWest could be seen as the loser, because the other, if its got any wit about it, will move swiftly to mop up the Woolwich, Alliance & Leicester and B&B. And these are all significantly better-managed and more profitable businesses, with a very decent geographical spread between them.

There is no longer any secret that the Woolwich and A&L see their futures as in some way inextricably linked, even though this marriage of true minds may be some time coming yet. B&B has always been the perfect partner for either one of them.

But the rivalries and hostilities of the old building society world make their unilaterally getting together almost impossible. They need an outside protagonist to make it all happen. And they see that too. No one is better positioned than one of the Scottish banks to create a new diamond out of these middle-ranking pearls.

And don't forget that the Woolwich, with John Stewart, is run by a very charming but canny Scot, indeed one of the shrewdest around. A man the Scottish banks could easily work with.

But of course, all of this neglects to consider the next actions of another intrepid and determined flower of Scotland, Ian Harley, chief executive of the Abbey National. Now, he has always dreamed of running a Scottish Bank, and may yet prove to be the joker in the pack.