Opinion: Ian McConnell: Who will lament demotion of centuries-old Scottish name as Royal Bank of Scotland becomes NatWest Group?

It is happening in the midst of another huge crisis. The human tragedy that is the Covid-19 coronavirus pandemic is very different in nature to what occurred in 2008/09. However, it looks set to also hammer the global economy, having already led to plunging gross domestic product and surging unemployment amid lockdowns needed to save many, many thousands of lives.

The name-change was announced in February (shortly after Alison Rose’s accession last November to chief executive of Royal Bank of Scotland) when there was little if any sign of what was about to unfold across the globe with the developing pandemic. We are in a very different world now.

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There has been much debate in the years since the global financial crisis over whether or not, or to what degree, the Royal Bank of Scotland name has been tarnished by the need for the huge bail-out. It is worth remembering in this context that Royal Bank of Scotland was not alone in finding itself on the brink. HBOS, the parent company of Bank of Scotland, was the subject of a rescue takeover by what was then Lloyds TSB, with the combined entity receiving many billions of pounds of taxpayer support.

HBOS was a simpler organisation. It was more domestically focused and was essentially a mortgage bank with a corporate lending operation that found itself heavily exposed to the wrong sectors when the global financial crisis hit. Yet the focus, then and over the years since, has been more firmly on what happened at Royal Bank of Scotland.

Of course, Royal Bank of Scotland pursued a high-profile international expansion. Its massive deal to buy large parts of Dutch bank ABN Amro, in a consortium bid with Santander and Fortis, was completed in the autumn of 2007. By this time, we had seen the harbingers of what was to turn into a huge global financial crisis with the collapse of US investment bank Lehman Brothers in the autumn of 2008.

Royal Bank of Scotland had a high-profile chief executive in Fred Goodwin, nicknamed “Fred the Shred” back in the days when he was at Clydesdale Bank, seemingly for his cost-cutting prowess.

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Mr Goodwin had back at the start of the millennium been part of the management team, along with Royal Bank of Scotland veteran Sir George Mathewson, which proved victorious in a bid battle for NatWest. Both Royal Bank of Scotland and Bank of Scotland had launched hostile bids for the much-larger NatWest. Ms Rose, who studied at Durham University, had joined the NatWest graduate scheme in 1992.

The integration of NatWest by Royal Bank of Scotland was viewed by the City as a textbook exercise. The Scottish institution prospered on the back of the acquisition.

NatWest had found itself a target because it was viewed as less efficient, in terms of its cost-income ratio and so forth, but was, in essence, a very sound bank.

The NatWest deal seemed to defy conventional wisdom at the time that a hostile banking takeover could not work because it was important to get right under the bonnet in terms of conducting extensive due diligence and getting to know exactly what was being bought.

The ABN Amro deal suggested the conventional wisdom did apply, certainly on occasion.

There has been so much talk in the years since the global financial crisis about the Royal Bank of Scotland name. This coincided with much bad publicity for the institution around its treatment of some business customers which had found themselves in financial trouble amid the global financial crisis and in its wake.

Royal Bank of Scotland has also had to pay out huge amounts for mis-selling of payment protection insurance. It is worth emphasising that the PPI issue is one that has affected the broader sector, and is not in any way Royal Bank of Scotland-specific.

The bank has also attracted criticism for large-scale branch closures, but such axing of outlets has also, lamentably, occurred across the sector.

For all the talk, the institution stuck with the Royal Bank of Scotland name at parent-company level, under former chief executives Stephen Hester and Ross McEwan.

This was good to see. At the end of the day, all companies have ups and downs over years, decades, and, in the case of Royal Bank of Scotland, centuries. A long-term perspective is important.

Of course, the matter may look different from a non-Scottish perspective. It must do so, given the name-change decision.

And we must remember that the UK Government continues to have a majority stake in Royal Bank of Scotland. Lloyds Banking Group, created by Lloyds TSB’s rescue takeover of HBOS, returned to full private ownership in 2017.

However, for all its recent travails, it seems anecdotally that a very significant number of Royal Bank of Scotland customers north of the Border would far prefer to see the name prevail at parent-company level.

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This is understandable, given its centuries of generally proud tradition. Royal Bank of Scotland was founded in 1727. The NatWest name dates back to 1968.

On its website, under a heading declaring “We’re renaming to NatWest Group”, Royal Bank of Scotland has been giving the following explanation: “Given our progress, solid financial footing and the forward-looking strategy we’re now implementing, we plan to rename the group to align with the brand which the majority of our business is delivered from.”

The aspects listed are ones which many would surely have attributed to Royal Bank of Scotland for large parts of the centuries it has been in existence. As already noted, institutions of all types experience ups and downs and the global financial crisis seems in many ways like another lifetime in the midst of this awful pandemic. Appetite for brands can also be a fickle thing. Imagine if NatWest Group had been suggested as the name for the enlarged bank back at the time of the hostile takeover in 2000? At that time, there seemed to be a very positive emotion in the City towards the Scottish brand.

Of course, recent years have not been kind to venerable Scottish banking brands.

Control of the big banking players in Scotland has shifted southward to a huge extent since the start of the millennium, in terms of where the decision-making takes place.

Royal Bank of Scotland has seen a shift of control to London, in terms of where its top brass spend most of their time, and given the UK Government stake, although the senior roles at its Gogarburn campus on the outskirts of Edinburgh are very important to the Scottish economy. Ms Rose is based in London, something which attracted a flurry of headlines back in February.

The bank has not over the past decade looked that much like the truly Scottish-based operation which it had been for centuries.

Bank of Scotland was subsumed into HBOS, through its merger with Halifax, and then into Lloyds Banking Group.

Thankfully Royal Bank of Scotland will remain as a brand name north of the Border. Hopefully, this will be a permanent situation. Likewise, Bank of Scotland has remained the key brand of Lloyds Banking Group north of the Border.

We are about to see the disappearance of the Clydesdale Bank brand on Scottish high streets. This venerable Scottish institution floated on the stock market, after its long-time owner National Australia Bank decided to exit. It did so under the CYBG (Clydesdale and Yorkshire Banking Group) name.

However, with CYBG’s effective takeover of Virgin Money, London-based chief executive David Duffy has favoured the Virgin brand and Clydesdale will disappear from branches.

While Royal Bank of Scotland will not disappear as a brand from high streets north of the Border, today’s change of parent-company name to NatWest Group is the latest in a series of disappointing developments in the context of the proud Scottish banking tradition which still exists.

The degree to which it is lamented is likely to depend in large part on perspective – crucially on whether it is being assessed from a Scottish viewpoint or from elsewhere.