Could RBS / NatWest Have Become a Bulge Bracket Bank Without 2008?
Serious question, and I am aware the base case answer is probably “no”, but I am curious how feasible it actually was.
Pre-2008, Royal Bank of Scotland (now NatWest Group) was not some sleepy UK retail lender. It was briefly one of the largest banks in the world by assets, aggressively expanding internationally, buying ABN AMRO, and clearly trying to move up the value chain into more serious investment banking territory.
This was also under Fred Goodwin, who was about as aggressive as bank CEOs come. The culture at the time seemed to reflect that. I actually spoke to a former RBS employee who said that if you ever found yourself in an elevator with Goodwin, the rule was simple: you did not speak to him. At all. That probably tells you something about the internal environment and ambitions.
I know that realistically RBS was never going to dethrone Goldman or JPMorgan, and the IB arm was always a bit of a Frankenstein compared to true US bulge brackets. But before the crisis, it feels like they were at least trying to build something closer to a global universal bank with a credible investment banking franchise, rather than what we see today.
So the question is this.
Absent 2008 and the ABN disaster, was there a plausible world where RBS or NatWest ends up as a second-tier bulge bracket type player? Or were there structural, cultural, or talent constraints that meant it was never really on the cards, regardless of balance sheet size and aggression?
Curious what people who were around pre-GFC think.
RBS/NatWest's trajectory pre-2008 certainly showed ambition, but the likelihood of it becoming a true bulge bracket bank, even without the financial crisis and the ABN AMRO debacle, was slim. Here's why:
Structural and Cultural Constraints:
While RBS aggressively expanded and aimed to build a global universal bank, its investment banking arm was always a "Frankenstein" operation, as you aptly put it. Unlike the established bulge brackets (Goldman Sachs, JPMorgan, etc.), RBS lacked the deep-rooted culture, talent pipeline, and institutional expertise in investment banking. The internal environment under Fred Goodwin, while aggressive, was also reportedly toxic, which could have hindered long-term talent retention and development.
Talent and Legacy:
Bulge bracket banks are built on decades of relationships, expertise, and a reputation for delivering in high-stakes situations. RBS, despite its size and ambition, was relatively new to the serious investment banking game. It would have taken years, if not decades, to build the kind of credibility and client trust that firms like Goldman or JPMorgan enjoyed.
Geographic and Market Limitations:
RBS was heavily UK- and Europe-focused, with limited penetration in the US and Asia compared to true global players. Even with aggressive expansion, it would have struggled to achieve the same level of global footprint and influence as the established bulge brackets.
The ABN AMRO Acquisition:
Even without the financial crisis, the ABN AMRO acquisition was a massive overreach. It stretched RBS's balance sheet and management bandwidth, creating a fragile foundation for its investment banking ambitions. The deal itself was emblematic of the bank's overly aggressive and, arguably, reckless approach to growth.
The Financial Crisis as a Catalyst, Not the Sole Cause:
While the 2008 crisis exposed and accelerated RBS's vulnerabilities, many of its issues were structural and would have surfaced eventually. The crisis merely brought them to light in a dramatic fashion.
In conclusion, even in a world without 2008, RBS/NatWest would have faced significant challenges in becoming a second-tier bulge bracket bank. Its aggressive expansion and balance sheet size were not enough to overcome the cultural, structural, and market limitations that set it apart from the true bulge brackets. At best, it might have carved out a niche as a strong regional player with some global capabilities, but dethroning or even joining the ranks of the established bulge brackets was likely never on the cards.
Sources: Is Wells Fargo poised to become the next BB?, The rise of RBC Capital Markets, David and Goliath: The Boutique and The Bulge Bracket, The rise of RBC Capital Markets, RBC is NOT a BB. Change my Mind.
Bump
It would have become a bit like Barclays. Good in EMEA LevFin, has good markets desks in EMEA, perpetually trying to break into the US but never succeeding
Barclays will never successfully break into the US, it’s not like they can just buy a bulge bracket American bank, keep all the people and change the name on the door.
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Lol i feel like this comment went right over them youngin's heads.
Its talking about lehman brothers!!
With hindsight and today, look at how European governments actively try to block any significant cross-border or consolidatory merger of scale (UniCredit-Commerzbank, domestic consolidation in Italy, Spain). Europe doesn't have the capital market capability nor political / institutional appetite to deregulate to create a continental champion nor does it actually want to. It wants competitive, medium-to-large sized banks with a domestic focus and the only banks that are expanding and growing cross-border are the ones looking East of Germany (Poland, CEE, Balkans are the areas of consolidation and growth opportunities. This is in-part reflected in the US-EU bank valuation discount. It's not to say European banks are performing badly by any means. With the lack of fiscal and monetary integration, we can only talk of hypotheticals. You're not going to see a European champion competing with a US BB based off either retail dominance nor a corporate / commercial banking powerhouse given the US banks got in the door early (especially in the UK from the 80's to mid-2000's) by acquiring corporate finance houses and re-franchising them. Plenty of European governments still have minority - sizable shares in the banks they bailed out post 2008 and Eurozone crisis and most of them aren't too desperate to exit now (though you are seeing more IPO talks in some cases, direct M&A is attracting more PE interest which is politically difficult to navigate) given EU banks are performing solidly on the whole. They will wait and monetize. Not too desperate to deregulate and relief overcapitalized banks
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