Outlook: Battle commences for top RBS post

GEORGE MATHEWSON, chief executive of Royal Bank of Scotland, is a banker of the old style - a tough-talking, no-nonsense operator who doesn't suffer fools gladly. It is generally agreed in the City that he's done a great job in steering his company back from the near-terminal mess it was in in the early 1990s to what today is one of Britain's most successful and fast-growing banks. Some even compare him to the now almost legendary Sir Brian Pitman of Lloyds TSB, by common consent Britain's most outstanding banker.

After such plaudits, you might have thought that when Dr Mathewson comes finally to hang up his spurs in April 2000, it would be only natural and fair to see him eased into retirement by first taking on the chairmanship, perhaps in a non-executive capacity. Dr Mathewson believes the surveys which tell you every year worked in a high-pressure position after the age of 60 reduces your life expectancy by two. But he doesn't want to retire entirely.

Unfortunately, it is not clear that the present incumbent, Viscount Younger, shares this view. Sir Iain Vallance, chairman of British Telecom and non- executive deputy chairman of RBS, would dearly love the job too and it may be that he has a greater in with the Viscount, a former Secretary of State for Scotland, than the prickly Dr Mathewson. The battle for the succession is already said to be very much a live issue, and is bound to revive unwelcome talk of a serious rift between chairman and chief executive.

Dr Mathewson and Lord Younger go back years to when the two worked together, the one as head of the Scottish Development Agency, the other as Secretary of State, and are said to be good friends. But they don't see eye to eye on a great many things. Dr Mathewson is pro-euro and pro-devolution, almost to the point of being a separatist; Viscount younger is precisely the reverse.

More importantly, it is said that the two disagreed over whether RBS should match the Halifax in the bidding for Birmingham Midshires, worse that Dr Mathewson went over Lord Younger's head in talking to the Halifax about a possible merger of the two companies. Both these rumours have been vehemently denied, but the bank failed to quash them entirely.

Furthermore, as a non banker and outsider himself, Viscount Younger may not share Dr Mathewson's view that the chief executive, with long-bred loyalties and a fixed corporate approach, is the natural man for the job.

Dr Mathewson is a fighter, and at this stage it would be unwise to write him off. He is also able to point to some highly successful precedents, the most obvious of which is Sir Brian Pitman, who rose effortlessly from the position of chief executive at Lloyds to that of executive chairman.

However, in the case of Lloyds TSB there's not much doubt but that Sir Brian continues to run the show, despite his gathering years. Whether Royal Bank of Scotland believes this the most appropriate way of managing the succession too remains to be seen. Sir Iain Vallance already spends most of his weekends north of the border and he's said to be itching to move up there for good. We could be in for quite a battle.