Cobwebs & Computers

In their struggle to rise above a rundown economy, Britain's major industrial companies have moved into a flurry of mergers. Since last summer, consolidations have created Europe's largest steel company, second-largest auto producer and third-largest electrical-equipment manufacturer. Now the trend has spread into the once staid realm of banking. In the largest bank merger in Britain's history, Westminster Bank, the country's fourth largest (deposits: $4.2 billion), has just agreed to join forces with the fifth-largest, National Provincial Bank (deposits: $4.1 billion).

The combine, for which neither a name nor a boss has yet been picked, will become Britain's largest domestic bank. Counting the funds in two smaller banks owned by National Provincial--the District Bank and Coutts & Co.--it will have total deposits of $8.3 billion--about $2.2 billion more than the present frontrunner, Barclays Bank. Barclays Bank D.C.O. (for Dominion, Colonial & Overseas), in which Barclays Bank has a 51% holding, remains larger, however, with $9.7 billions in deposits.

Vigorous Battle. Though British banks long prided themselves on being among the world leaders in both size and prestige, the crown has slipped. The U.S. now has six banks bigger than any in the U.K.; the Bank of America, with $19 billion of deposits, is well over twice the size of Britain's largest. Most big U.S. banks have London branches that battle vigorously with British banks for time deposits. On top of that, British banks have come under pressure to match the growth-by-merger of their corporate customers--or lose accounts.

Government itself spun much of the cobweb over British banking. It now insists that U.K. banks limit the total amount of overdrafts by their customers, forces them through other restrictions to lend no more than 55% of their deposits. Fifty years ago, the British Treasury put an end to an earlier wave of bank mergers by threatening legislation to control them. Backed by the Bank of England, that anti-merger doctrine persisted until last spring. Then the Labor government's Prices and Incomes Board called for a new policy, complaining that British banks had grown stodgy and uncompetitive, and had far too many branches.

Ledgers by Hand. The board is certainly right about branches. All over Britain, little towns of 3,000 often have five banks, some with so little business that they open only two or three days a week. At 1,140 of National Provincial Bank's 1,640 branches, clerks still post ledgers by hand. By merging, both National Provincial and Westminster expect to reduce the heavy but inevitable cost of converting to fully computerized accounting. The two banks should make a good fit. Westminster, headed by Chairman Duncan Stirling and Chief General Manager Ralph Elliott, has concentrated on personal and professional accounts, has its main strength in London and southern England. National Provincial, led by Chairman David Robarts and Chief General Manager William Davidson, has stressed industrial accounts and expansion in the Midlands and northern England. And British banking's belated reach for efficiency seems likely to bring more mergers soon. Lloyd's Bank, now No. 3 in size of deposits, last week became a stock market favorite to take over sixth-ranking Martins Bank, which is looking for a partner.

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