Bank of Scotland would slash £290m from Natwest spend

The Bank of Scotland today claimed it could slash £290 million of costs from Natwest's IT spend alone if its hostile bid for the bank is successful.

The IT cost savings amount to just under a third of Bank of Scotland's estimated total cost savings of more than £1 billion a year, should it acquire Natwest.

Other predicted savings are £510 million by implementing Bank of Scotland management practices and £215 million from the elimination of duplicated functions undertaken by the two banks.

The expected cost reduction in IT is attributed to, "management efficiencies and from the elimination of duplication in Bank of Scotland's and Natwest's IT related facilities, processes and functions," the Bank of Scotland stated.

Other areas where money can be raked back are through the migration to a common set of software applications across the enlarged group, a consolidation of data centres and leveraging purchasing power across the combined group.

The Bank of Scotland also believes that efficiencies will be made by applying its model to development costs, resulting in improved productivity, and by adopting its centralised approach and operational practices to reduce overheads.

A spokesperson for Natwest would not comment on these estimates. He said: "We don't publish an IT spend anyway. We have not even seen the Offer document. We will make further comment at that time, but not on the nitty gritty detail."

The Bank of Scotland's evaluation was undertaken by a broad group of senior and operational management based on assessment of cost structures of Bank of Scotland and a review of publicly available information regarding Natwest.

The matter was not discussed with the management of the Natwest Group. The offer document is expected to be posted to Natwest shareholders next week.