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Who pushed NatWest?

NatWest gambled on bancassurance, lost its acquisition target and its chief executive and triggered a raid on itself from Scotland. Many in the City of London are pointing the finger of blame at adviser JP Morgan for encouraging NatWest's delusions. How did an investment bank that prides itself on telling clients which deals not to do get so much egg on its face? Marcus Walker reports

Dine or be dinner

Bancassurance takes a knock

Some banks are simply unlucky. National Westminster Bank, which ranks number eight in Europe by market capitalization, has shown the reverse Midas touch with a string of acquisitions over the past decade. Its ideas didn't always seem stupid at the time. Other banks sometimes had the same notions. But somehow NatWest always ends up looking dumber than most when the pipe dreams turn to horror stories.

NatWest's most conspicuous failure during the 1990s, after its foray into investment banking, has been its stubbornly high cost-income ratio. It stands at 68%, higher than a decade ago, while market leader Lloyds TSB's ratio is 46% and falling. Lloyds' internal discipline has delighted investors and thus allowed it to pursue a voracious acquisition strategy. NatWest, on the other hand, tried to seek a transforming deal before proving that it can put its own house in order. This may turn out to be NatWest's last mistake.

The bid that backfired was a £10 billion ($16.7 billion) offer made in September for the insurance company Legal & General (L&G).

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