RBS is cautious on acquisitions
30 April 2003
Author: Antony Currie
Fred Goodwin got a laugh as he began to talk about his bank's attitude towards acquisitions. Speaking at the UBS Warburg financial services conference in New York yesterday (April 29), the chief executive of the Royal Bank of Scotland outlined where it could buy, and what size it might be looking be looking for. "We could make an acquisition in the US, continental Europe or the UK," he said. "And we could buy something that could be small, medium or large in size."
Not very helpful, it would seem, for a bank which is best known as the winner in the bitter hostile takeover of UK rival NatWest in 1999 and - due to its successful integration of NatWest and its enlarged market capitalization - is often touted as a key player in future bank consolidation. As the chuckles reverberated around the room Goodwin sought to explain: "I'm not trying to be funny, I'm just saying that we're not obsessed with having to buy a medium or large institution."
He gave a recent deal as an example of what RBS might be looking for in the future: in mid-April the bank spent $285 million to buy Port Financial, the holding company for Cambridgeport Bank in eastern Massachusetts. It has just 11 branches, $1.2 billion in deposits and $800 million in loans, and will become part of RBS's US retail bank, the Citizens Group.
He reinforced this when he said that the bank would not be seeking to list an American Depository Receipt, as it would only need it for capital, presumably for a large purchase. And he also said that he and his colleagues "are not shy or embarrassed about performing share buy backs. We're not building a war chest."
And there's one type of acquisition that he's definitely not going to make: "We're not going to buy an investment bank. Not having an equities platform kept us away from the problems of all the equity volatility, and it's worth staying away from that. Our bias on acquisitions is towards lower volatility."
Thanks to Reactions Magazine
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