NATIONAL WESTMINSTER BANK PLC

1829–1970

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National Westminster Bank (NatWest) was created in 1968 by the merger of three major banks all established in the early 19th century: the District Bank, the National Provincial Bank, and the Westminster Bank. By vigorously expanding in size and significantly improving the quality of its customer services since its first business day in 1970, NatWest overtook Barclays to become Britain's largest commercial bank.

The District Bank was first established in 1829 in Manchester as the Manchester and Liverpool District Banking Company, with a starting nominal capital of £3 million. The company planned to create a banking network for northwest England by opening new branches and acquiring smaller banks, and within five years had opened 17 branches.

By 1840, however, District Bank was forced to write off over £500,000 in bad debts--a huge sum at the time--due to management misjudgment, slowing the firm's acquisitions and expansion for the next few years. In addition, the bank was closely associated with England's textile industry; the company suffered during the cotton famine of the 1860s caused by the North's blockade of southern ports during the American Civil War. Judicious acquisitions, however, helped District Bank to weather this particular storm.

At the beginning of 1885, District Bank, recovered from its previous losses, opened an office in London. As customer deposits increased and astute commercial credit policies and management were put to work, the bank began a moderate expansion program that lasted until the outbreak of World War I. After a five-year hiatus, the company was caught up in the postwar boom and opened 130 new branches between 1919 and 1924.

Relatively unscathed by the worldwide Depression of the late 1920s and early 1930s, the bank continued its expansion program, and immediately after World War II decided to create a network of branches throughout the country. In 1935 District Bank merged with the County Bank, a Manchester-based entity, increasing its paid-up capital to almost £3 million and kicking off its nationwide expansion. This strong-growth strategy continued unabated up to and following World War II until District Bank's acquisition by National Provincial Bank in 1962.

These acquisitions gave NatWest USA 285 branches throughout the Northeast and $20 billion in assets.

1833–1962

National Provincial Bank was organized as a joint-stock company in 1833. At the time, the Bank of England had exclusive statutory power to issue bank notes within a 65-mile radius of London. Although the bank's administrative offices were in London, it decided to open its branches outside the 65-mile radius so that the bank could issue its own notes. From the beginning National Provincial lived up to its name, serving provincial customers throughout England. The bank was without a national competitor for about 60 years.

The first branch of National Provincial bank was opened on January 1, 1834 in Gloucester. Like the District Bank, the company planned to establish new branches and acquire smaller banks, and by 1835 had opened 20 new offices. By the mid-1860s, National Provincial had acquired more than a dozen small banks and had established 122 branches and sub-branches throughout England and Wales. It finally opened a London banking office in 1866, recognizing that a presence in the world's financial capital was worth the sacrifice of its note-issuing privilege.

The bank continued to grow rapidly. At the turn of the century, the company had about 250 offices in England and Wales and approximately £3 million in capital. After World War I, the company began an accelerated acquisition-and-merger strategy. The most important of its mergers during this time was with the Union of London and Smiths Bank, itself the product of the amalgamation of two of the most venerable banking institutions in England, which added 230 branches to National Provincial's growing financial network.

Although National Provincial's growth had been interrupted by World War I, the bank vigorously renewed its acquisition program after the war. Sheffield Banking Company, Northamptonshire Union Bank, Guernsey Banking Company, Bradford District Bank, and Coutts & Company, all acquired between 1919 and 1924, and North Central Finance, acquired in 1958, were a few of the significant purchases made by National Provincial. In 1962, District Bank was bought by National Provincial to create a company with over £1.4 billion in assets and 2,100 branches, although the two banks maintained their separate identities and independent operations.

Westminster Bank was organized in 1834 as the London and Westminster Bank, the first joint-stock bank in London. This firm was the first bank established under the auspices of the Bank Charter Act of 1833, which allowed joint-stock banks to be founded in London. For various reasons, the press, private banking concerns, and the Bank of England were so hostile to the Bank Charter Act that London and Westminster's management was primarily concerned with defending the company's right to exist rather than setting up an extensive branch network. As a result, the bank opened only six London branches in its first three years and no additional offices were established until nearly 20 years later.

London and Westminster made its first acquisition in 1847, when it bought Young & Son. In about 1870 it acquired Unity Joint-Stock Bank, and mergers with Commercial Bank of London and Middlesex Bank had been arranged in 1861 and 1863 respectively. By 1909 London and Westminster had opened or acquired 37 branches in and around London. Yet, despite this expansion effort, the bank felt the effects of competition from provincial banks like Lloyds and Midland. These two banks had already established large regional branch networks and were quickly encroaching upon the London market. In order to meet this challenge, London and Westminster merged with the influential and prestigious London and County Bank in 1909, which had 70 offices citywide and almost 200 in rural counties. The resulting entity was named the London County and Westminster Bank.

1913–1989

In 1913, the bank formed a subsidiary, London County and Westminster Bank (Paris), which opened branches during and after World War I in Bordeaux, Lyons, Marseilles, Nantes, Brussels, and Antwerp. The bank itself also established offices in Barcelona and Madrid during the same time. In 1917, bank officials decided to acquire the Ulster Bank (which continued to operate separately), with 170 branches throughout Ireland, and in 1918 bought Parr's Bank, with over 320 offices throughout England. These purchases made London, County, Westminster & Parrs (which became simply Westminster Bank Ltd. in 1923) the fifth-largest bank in England.

During the economic difficulties of the late 1920s and early 1930s, the bank kept tight centralized control over the continental branch of the business to avoid the dangers of too rapid an expansion in unfamiliar markets, but this policy stunted Westminster's international operations. It did mean that the bank escaped the bad debts and currency fluctuations that plagued many other banks between the world wars, allowing the domestic side of the business to grow steadily. At the time of the merger with National Provincial in 1968, Westminster had 1,400 branches in England alone.

The merger of National Provincial and Westminster Bank, announced in early 1968, shocked the British public and banking community. In the late 1960s, the Bank of England tried to rationalize the banking industry through a policy known as competition and credit control, which aimed to put banks on a more equal and competitive footing and to improve control of the nation's money supply. Although the Bank of England indicated a willingness to allow mergers as part of the rationalization process, no one had seriously believed it would permit mergers among the largest and most influential banks.

The District Bank, National Provincial, and Westminster Bank were fully integrated in the new firm's structure, while Coutts & Company (a 1920 National Provincial acquisition), Ulster Bank, and the non-banking subsidiaries continued as separate operations. Duncan Stirling, chairman of Westminster Bank, became NatWest's first chairman. In 1969 David Robarts, former chairman of National Provincial, assumed Stirling's position. The new company, National Westminster Bank, opened its doors for business on January 1, 1970.

In the late 1970s and early 1980s, following a massive restructuring and rationalization, NatWest began a concerted effort to expand its international operations. In 1975 NatWest expanded into Scotland, opening offices in Edinburgh, Glasgow, and later Aberdeen to support its participation in North Sea fuel projects. Under the direction of Robin Leigh-Pemberton, who became chairman in 1977, the company purchased the National Bank of North America in New York. By 1979, NatWest had extended its bases of operation in France and Belgium, had opened offices in West Germany, and had established overseas representatives in Australia, Bahrain, Canada, Greece, Hong Kong, Japan, Mexico, Singapore, Spain, and the Soviet Union.

Thomas Boardman replaced Robin Leigh-Pemberton as chairman of NatWest in 1983 when the latter was appointed governor of the Bank of England. Boardman and Tom Frost, NatWest's CEO since 1987. continued to transform NatWest from a domestic banking institution into an international financial organization, Part of the plan included forming NatWest Investment Bank through the acquisition of a medium-sized stock exchange jobber and a broker. NatWest also expanded its American subsidiary, NatWest USA, by acquiring First Jersey National Bank in 1987 and Ultra Bancorp, another New Jersey-based bank, in 1989. These acquisitions gave NatWest USA 285 branches throughout the Northeast and $20 billion in assets. Despite its reputation for caution, NatWest remained intent throughout the 1980s on building its American subsidiary into a super-regional bank that might someday challenge the traditional dominance of the New York money-center banks.

1987–1989

The bank lived up to its reputation for caution, however, with its handling of the Third World debt crisis. In June, 1987 it added £246 million to its reserves, becoming the first British bank to follow the lead of the American money-center banks by limiting its exposure to Third World loans.

NatWest's good name was tarnished, however, in December, 1988, when the Department of Trade and Industry (DTI) began to investigate the role played by the bank's investment-banking subsidiary, County NatWest, in an acquisition by the employment agency Blue Arrow. In 1987 County NatWest underwrote a stock offering for Blue Arrow to raise cash for the deal, but the results were disappointing. County NatWest was left with an interest in a 13.5% stake in Blue Arrow. It concealed that substantial interest by dividing the stake between itself, its own market-making arm, County NatWest Securities, and the Union Bank of Switzerland (UBS), to which it granted an indemnity against losses.

These moves were made in secret, however, to spare County NatWest the public embarrassment of a failed offering. But after the October stock market crash opened the Blue Arrow wound even further, its actions could no longer be concealed. In December 1987, County NatWest made a payment to UBS to release the indemnity, purchased County NatWest Securities' holding, and announced that it held a total stake of 9.5% in Blue Arrow.

The DTI released the results of its investigation in July, 1989, sharply criticizing County NatWest's actions. In failing to report its stake in Blue Arrow, it said, County NatWest violated a law requiring any party holding a 5% or greater interest in a company to report that fact in a timely fashion. This served to deceive both regulators and the financial markets about the true value of Blue Arrow stock. Although the DTI report did not criticize him, Lord Boardman announced that he would retire from the bank in September, five months ahead of schedule, and two of NatWest's deputy chief executives and another senior director also resigned. Lord Alexander, the former head of the British government body overseeing corporate takeovers, became chairman on October 1, 1989.

While the Blue Arrow affair certainly damaged NatWest's once-sterling reputation and its budding investment-banking business, the bank's strength and reputation for caution promise a quick recovery and a bright future.