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SCMP Reporter

NatWest Markets, the troubled British investment banking arm of NatWest Bank, yesterday spurned an unsolicited bid for its global equities business from Deutsche Morgan Grenfell (DMG).

 NatWest Markets, which recently completed a significant restructuring, said the DMG offer was not in the best interests of shareholders.

 The news sent NatWest's share price down by 3.89 per cent to 863.5 pence.

 Institutional investors are keen to see NatWest devote more of its attention to its more successful commercial and retail banking business, and increasingly narrow its focus on investment banking.

 NatWest is also understood to be eager to speed through the sale of its investment banking arm, following the revelations that rival British bank Barclays is also in talks to sell the equities, capital markets and corporate finance business of Barclays de Zoete Wedd (BZW).

 But news that it had opted to reject DMG's offer depressed investors.

 'It means that NatWest still owns a business that shareholders aren't happy with,' one trader said.

 The stock was further depressed, after the Dutch bank-insurer ING Group also indicated it was not interested in NatWest's equities business.

 Last year NatWest was hit with a GBP90 million (about HK$1.16 billion) options mispricing scandal in its equities business, which led to the overhaul of the division.

 Its move to reject DMG comes as the list of contenders to snap up the BZW businesses has become shorter.

 United States investment bank Bankers Trust confirmed this week that it had decided to pull out of the bidding, and it is understood that only Credit Suisse First Boston (CSFB) and Donaldson, Lufkin & Jenrette (DLJ) are left.

 CSFB is regarded as the frontrunner for BZW.

 The recent stock market turmoil is understood to have been weighing heavily on bidders' minds, awakening them to the risks to valuations that the turmoil has highlighted.

 Barclays has always favoured a US bidder, as it believes it will be able to summon the financial strength and shareholder backing to maintain the BZW business.

 European institutions are thought to be more subject to shareholder pressure, who want to see quicker returns.



NatWest Markets turns down bid