Fred Goodwin

Chief Executive, Royal Bank of Scotland, Britain

It's still called the Royal Bank of Scotland, but RBS, as it is more commonly known these days, has grown far from its roots as a regional bank in Edinburgh. Slowly but surely, RBS has built itself an empire stretching from Beijing, China, to the shores of Lake Erie. Last year, flush with cash, RBS made seven acquisitions around the world, including four in the U.S., and announced two others it completed this year. Then, in early May, the bank said it would purchase Charter One Financial Inc. (CF ) of Cleveland for $10.5 billion. The deal will spread the banking web of RBS across the Midwest for the first time -- and make its U.S. banking operations No. 7 in the country.

The architect of this expansion is Fred Goodwin, the bank's low-key group chief executive. A 45-year-old accountant who ascended to the helm in 2000, Goodwin is considered an aggressive but careful predator who delivers results. Since he took over, the bank's assets have quadrupled, its cost-to-income ratio has improved markedly, and profits have soared. In 2003 pretax profits rose 29%, to a record $10.9 billion. Suddenly, RBS finds itself the world's fifth-biggest bank, thanks to Goodwin. "He is seen with equal amounts of awe and trepidation in the financial-services industry -- as a man who led the transformation of a good provincial bank into a world-class player," says Philip Middleton, head of retail banking at Ernst & Young LLP in London.

RBS's global rise began with Goodwin's audacious $37 billion hostile takeover of National Westminster Bank PLC (NWPRC ) in March, 2000. The deal stunned Britain's banking world, in no small part because National Westminster Bank was three times the size of RBS at the time. It also was the biggest takeover in British banking history. Undaunted, Goodwin successfully integrated the institutions, cutting 18,000 employees in the process and achieving cumulative cost savings of $6.4 billion from 2000 to 2002.

Since acquiring NatWest, Goodwin has focused most of his energy on the U.S. market. It's an attractive place to Goodwin. "It's large, it's well-ordered, there's prosperity," he says. "And we speak the same language -- or almost." He has impressed investors with his choice of U.S. banks to buy, while many of his British rivals have failed to keep up. Goodwin tends to buy small banks that have little risk. Along with Charter One, he has picked up Massachusetts-based Medford Bancorp Inc., (MDBNK ) the retail division of Pennsylvania's Mellon Financial (MEL ), and Commonwealth Bancorp (CMSB ) of Pennsylvania, among others.

Banking experts say Goodwin's success in acquisitions lies in his disciplined approach. Before deciding to make a purchase, he does an unusual amount of due diligence. In the recent Charter One deal, for instance, RBS says it spent 500 man-days -- the equivalent of 100 people working for five days -- examining the bank's books. Goodwin decided to bite. Charter boosts the amount of pretax profit the bank gets from the U.S. to 25% from 19%, and puts RBS in a position to expand further in the Midwest.

Goodwin, known in the City as "Fred the Shred" for his vigorous cost-cutting, joined RBS in 1998, as deputy chief executive to Sir George Mathewson, the current chairman. Prior to that, the native of Paisley, Scotland, was CEO at two British banks, Clydesdale Bank PLC and Yorkshire Bank PLC. Before working at the banks, he was a partner at accountancy Touche Ross & Co.

So what's next for RBS? Having accumulated an estimated $4 billion in cash, you'd think Goodwin would be in a rush to snap up more banks. Not so. "You have a long time to regret it if you don't get it right," he says. That kind of thinking is what has put Goodwin, and RBS, in the top rank.

    Before it's here, it's on the Bloomberg Terminal.