Outlook: Woolwich

IF THE Woolwich did not already exist would anyone have invented it? Much as it would pain the bank's ever phlegmatic chief executive, John Stewart, to admit it, the answer must be no. It is neither big enough to be - well - big, like the Halifax, nor small enough to sell itself as a low cost niche producer like the Northern Rock.

Bar some residual affection among customers, many shareholders would be quite happy to sell to the highest bidder. The only problem is potential predators have shareholders of their own who would baulk at paying the kind of price that would leave Mr Stewart and his board no alternative but to hoist the white flag and run crying to the bank.

The fact is that the Woolwich does exist and the poor chap has no alternative but to find some way of justifying both its and his existence. In the absence of the mega-deal that the City would love to see, yesterday's tie-up with Countrywide, the giant mortgage machine founded by the perpetually bronzed Angelo Mozilo, does at least score for originality if nothing else.

And it might actually work. The technology Countrywide can deploy is streets ahead of anything else in the UK market. The company has a total lending book of $220bn and has already sold $1bn worth of mortgages on the Internet.

If the joint venture goes to plan, the Woolwich will be in a position to undercut its rivals in the UK and on the wider European stage, both in terms of pricing and the range of products it can offer.

If, as some predict, the dynamics of the UK mortgage market change sufficiently to allow widespread use of off-balance sheet finance, having a partner on board with the kind of securitisation experience Countrywide can boast, could prove invaluable.

In the end, the linkup may prove a trojan horse for Mr Mozilo's wider European ambitions. Most of these joint ventures either don't work and fizzle out, or end up with one party or the other wanting to be boss and call the shots. It is not hard to guess whose pistol will pack the bigger punch when it comes to the final shootout.

Woolwich has two-and-a-half years of its five years of takeover protection left to run. Even the tiniest UK acquisition in the meantime would result in the bridge being lowered to all comers. The Countrywide link up provides an excellent alternative to an acquisition strategy, but it is hard to avoid the conclusion that eventually Woolwich will end up as part of a larger organisation, whatever it does to avoid it.