Royal Bank of Scotland

RBS arrivals add international clout

SCRUTINEER

MARTIN FLANAGAN


THE market will welcome Royal Bank of Scotland's announcement yesterday about top-level boardroom changes, even if concerns about a potential vacuum at the top have sometimes seemed redolent of the wish being father to the thought.

Chairman Sir George Mathewson is to retire at the next annual general meeting on 28 April and, as expected, he will be succeeded by Footsie heavyweight Sir Tom McKillop.


The latter was recruited as deputy chairman a few months back and is about to retire as chief executive of pharmaceuticals major, AstraZeneca.

Meanwhile, an open secret over the past week - that Citigroup treasurer Guy Whittaker is to succeed Fred Watt as RBS's finance director - was also confirmed yesterday. These are strong appointments. The United States is an increasingly important part of the Royal's business, it being now one of the sixth biggest players there following its £9 billion acquisition spree that has taken it from the Atlantic seaboard inland into Indiana, Michigan and Ohio.

Whittaker's long experience with Citigroup can only help in the likely continuing expansion of the American business, with McKillop's strong international experience helping both in this regard and also RBS's more recent expansion into China.

In addition, McKillop has experience of the banking sector already via his previous non- executive directorship at Lloyds TSB before the latter turned into the shrinking-yet-profitable bank.

RBS is a big international operation and these appointments both smack of an international approach.

In truth, RBS has been transformed from being a fairly parochial Scottish organisation from the early 1990s as the bank, first under Mathewson, and for the past five years under chief executive Sir Fred Goodwin, has raised its sights and raised its game.

It has led to some City concerns that Goodwin is the "Serial Acquiror From Gogarburn", with the subtext on his latest foray into China being "Be Scared: Be Very Scared".

But RBS and Goodwin can justifiably say they have not messed up yet. There will always be sceptics, but these latest two appointments add weight to the bank's claim that it wants a strong team at the top of the Royal going forward, and is not about being a one-man band on a mission to take over the world.

A cautionary tale

AS EXPECTED, investors in one of Britain's former corporate icons, Marconi, voted overwhelmingly for the £1bn deal that will see the reinvented telecoms group sell most of its assets to Ericsson of Sweden.

They did not really have a choice. Marconi has been largely on borrowed time since BT, its pivotal customer, ruled it out of a vastly-important £10bn contract to upgrade its network earlier this year.

Painfully, it came as Marconi was making some headway in reinventing itself following its fall to earth under previous management in an ill-considered tech acquisition spree in the late 1990s.

But, without the BT contract, it quickly became apparent to new management that it had neither the scale nor the reach to compete effectively.

From that moment on, it was a takeover waiting to happen. The rump of Marconi's business, the services arm, has been renamed as Telent and will attempt to earn a crust on the lower slopes of the industry.

In retrospect: we have witnessed a misguided play on turning a famous electronic systems company into a technology high-flier; a massive debt restructuring after a massive collapse in stock market value from £35bn to £1bn when the bottom fell out of the tech bubble; a shortlived re-invention as Marconi Corp; thousands put on the dole and the final sale of the remaining family silver to a bigger competitor from abroad.

It has been one hell of a rollercoaster ride for followers of the company - not to mention workforces.

Perhaps, above all, Marconi is a cautionary tale for those in business who prize "dynamic" diversification above all else.