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Natwest boss open to acquisitions as he predicts more consolidation in UK banking

Paul Thwaite, a 26-year veteran of Natwest, became its permanent CEO in February
Paul Thwaite, a 26-year veteran of Natwest, became its permanent CEO in February

The chief executive of Natwest has said the lender is open to acquisitions and predicted more consolidation in the UK banking market over the coming years.

Speaking at the Goldman Sachs European Financials Conference in Madrid, Paul Thwaite said Natwest would “review opportunities” to grow through acquisitions.

“It’s been interesting, but not a surprise, to me to see some of the activity in the UK market,” Thwaite said.

“I personally thought there was a degree of inevitability about it given some of the structural profitability challenges in parts of the UK market, as well as some of the ownership structures that exist in some of the banks and potentially people looking for exits.”

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His comments follow a wave of mid-sized banking sector tie-ups as high street challengers have pounced on smaller rivals struggling with cost pressures.

This year alone, Barclays has bought most of Tesco Bank, and Coventry Building Society agreed to a £780m takeover of The Co-operative Bank. The biggest deal by far has been Nationwide’s £2.9bn agreement to acquire Virgin Money, which shocked the City when it was first announced in March.

“[It] hasn’t surprised me at all, and I think there will be more consolidation as we go through,” Thwaite said. “Assuming the macro doesn’t change, I think we’ll see more consolidation over the course of the next couple of years.”

Natwest has been put forward as a potential acquirer in the mid-sized banking space, most recently for TSB Bank in the scenario that it goes up for sale under a new parent company.

Thwaite said that while acquisitions were “not off the table” for Natwest, the bank would approach opportunities through “a very clear lense”.

“It needs to offer compelling shareholder value and compelling strategic rationale, so strategic congruence. So they’re the two lenses that I look through with the team,” he added.

Thwaite noted some of Natwest’s recent “tactical M&A”, including inking a deal to acquire a £3bn mortgage portfolio from Metro Bank in 2020 “that added scale to our mortgage business and healthy returns”.

The bank was reportedly an interested party for a further £3bn of Metro Bank’s mortgage book when it considered selling it last year.

Thwaite also cited Natwest’s acquisition of youth-geared fintech RoosterMoney in 2021. “We’re now number one new market share in that segment,” he said. “So where we can add capability that really improves proposition, we’ll do that.”

Still, Thwaite said that given Natwest’s target for returns and the attractiveness of share buybacks, a prospective acquisition would have to clear “quite a high bar”.

“We’ll be very disciplined, we’ll be very focused,” he continued.