One of the UK's four major banking groups, NatWest is way behind the biggest, HSBC, and has been struggling to keep pace with the more dynamic Barclays and Lloyds TSB.

Formed in 1968 when the National Provincial and Westminster banks merged, its full history can be traced back to the 17th century.

The oldest of almost 200 private and joint stock banks which have joined forces down the years to form the current NatWest Group was Smiths of Nottingham, founded in 1658.

NatWest now has some 1,700 branches across the UK and Ireland, offering personal and corporate banking as well as mortgage, financing and broking services.

Included under the NatWest umbrella is the private bank Coutts, famous for counting the Queen among its clients.

Having got over the formalities of consolidation, NatWest concentrated on international expansion in the 1970s, initially with some success.

Deregulation in the 1980s, culminating in the 'Big Bang' of 1986, enabled the group to grow rapidly and develop its securities operations.

County Bank, the NatWest merchant bank, acquired stockbroking and jobbing firms to create NatWest Investment Bank.

But the group was hit hard by the stock market crash of 1987 and was deeply damaged by the Blue Arrow affair, in which NatWest found itself on the wrong end of a long-running and costly fraud trial.

It lost its way and began to get a reputation for being poorly managed. This is why in the recent takeover battle, there has been little sympathy for NatWest, contrasting with widespread admiration for the ambitions of the would-be buyers.

Restructuring

Having failed in its attempt to become a major international investment bank, NatWest has been gradually slimming down to concentrate on domestic operations.

In 1998, it sold NatWest Tower, one of London's landmarks and until then a proud symbol of the firm's stature.

Last year, Sir David Rowland - a former chairman of London's Lloyd's insurance market - was appointed chairman of the group.

He has mounted a spirited defence against the takeover bids from Bank of Scotland and the Royal Bank of Scotland.

The bids have prompted NatWest to speed up its reorganisation in the hope that a nimbler and more profitable structure will persuade shareholders to reject the offers.

Galvanised by takeover threat

The basis of its defence is to break up its businesses, shrinking its capital base to release £6.5bn to return to investors.

This is significantly more in cash than either Scottish bank is offering through their mainly share bids.

NatWest is also hoping to boost its consumer business with a joint venture with internet portal Yahoo, through which it is developing its online banking service.

This is an interesting move, as much of NatWest's problem is that its competitors are no longer familiar foes, such as Barclays and Lloyds TSB, but supermarkets and other retailers who are racing into the profitable business of financial services.

These new competitors are bringing about changes at breakneck speed, and there is no doubt that the key to the future of the industry is the internet.

Winning arguments

The bids from Bank of Scotland and Royal Bank of Scotland for NatWest value the group's stock at up to £2 a share more than their market value.

This is being seen as a reflection of investors' concern that the two bidders might be overstretching themselves. There is also a lack of shareholder enthusiasm for swapping NatWest shares for more bank stock.

If neither predator is able to put significantly more cash into their bid to woo shareholders - and here the Royal Bank is seen as favourite - the vote could well be split between the offers, letting NatWest off the hook.

Either way, merged or not, NatWest will come out of the takeover battle sharper and more focused, and thereby in much better shape to give customers what they want in the fast-moving internet age of banking.