Top Natwest director quits for US job

Banking shake-up: Tugwell negotiates pounds 1m-plus package as head of newly merged American operation

John Tugwell, NatWest's pounds 1.4m a year highest-paid director, has resigned to join the company that is buying the British bank's New Jersey subsidiary.

He is negotiating a pounds 1m-plus a year package to be chairman and chief executive of Fleet National Bank of New York.

Mr Tugwell has been NatWest's best-paid executive for several years, and his three year rolling contract with Bancorp could have netted him a huge pay-off if he had left.

But staying on as chairman and chief executive of the newly-merged operation is expected to be a lucrative career move for a banker who narrowly lost to Derek Wanless three years ago in the race to become chief executive of the whole NatWest Group.

The Bancorp acquisition means that Fleet will double in size to become America's tenth largest bank. The pounds 2bn transaction is scheduled to be completed by May, and Mr Tugwell is understood to be negotiating a new contract.

According to NatWest sources yesterday, Mr Tugwell always said that he would stay with Bancorp when he left London to turn around what was then an ailing subsidiary at the start of the 1990s.

His success in pulling NatWest out of the mire in the US has brought him rewards that far exceeded the remuneration of directors who stayed behind in London in ostensibly more senior roles in the group. The apparent career setback brought Mr Tugwell a salary measured against his US rather than UK banking equivalents, and he has done far better than Mr Wanless in remuneration terms. In 1994, for instance, Mr Tugwell received a total of nearly pounds 2m - while Mr Wanless managed roughly a quarter of that.

NatWest began its ill-fated expansion into US retail banking in 1979, but by 1991 Bancorp had accumulated $1bn of losses on property loans. By 1992 Mr Tugwell had returned the bank to profit, and then added two acquisitions.

The merger mania which seized American retail banking last year following cross-state deregulation posed a dilemma for NatWest: to spend heavily and expand, or to sell up. The bank confirmed last September that it had chosen the latter course, not least because of soaring US bank stock prices, and analysts expected the price to be at least two times book value, or over $4bn.

American accounting rules however meant that the sale of an overseas owned operation forced a write-off of the goodwill, which brought the price down to $3.16bn.

This was still way ahead of the $1bn valuation put on Bancorp four years ago, and the City viewed this as testifying to Mr Tugwell's success in reversing its fortunes.

While Mr Tugwell, 54, prepares for a new career as a senior US banker, the NatWest board is pondering how best to spend the proceeds of the Bancorp sale, which will release pounds 1bn of capital. It is keen to expand in investment banking and fund management. In this context a whole series of potential candidates have been linked with NatWest - including Legal & General, Friends Provident, Mercury Asset Management and Schroders.

Natwest has consistently refused to comment on all such market speculation.

However, the bank is not ruling out a 100m share buy back scheme along the lines of a similar one undertaken by Barclays Bank last year.

Some analysts would prefer NatWest to follow this route, seeing UK banks as heavily over-capitalised - and with a relatively poor history of expansion into non-retail areas.