Investor consortium in £1bn bid for RBS branches

By GARETH MACKIE
Published on 08/03/2013 00:00

ROYAL Bank of Scotland is understood to have received a £1 billion bid from a consortium of institutional investors for more than 300 branches.

The state-backed lender is being forced to sell the assets, which comprise 311 RBS branches in England and Wales and five NatWest outlets in Scotland, in return for receiving £45.5bn in UK government aid during the financial crisis.

Spanish bank Santander pulled out of a £1.65bn deal in October and RBS chief executive Stephen Hester has admitted that the group was struggling to find another buyer.

However, RBS is now thought to have received an approach from a group of 17 firms, including fund managers Invesco Perpetual and F&C. They declined to comment, as did RBS, 82 per cent owned by the taxpayer.

Hester said last week that the group’s “baseline” plan was for an initial public offering (IPO) of the assets using the mothballed Williams & Glyn’s (W&G) brand.

“We have to recognise that there are not a lot of buyers for UK banks right now,” he said. “If someone wants to buy it [the W&G business] then terrific, but buyers are thin on the ground.”

In the group’s annual results statement, RBS said it had received “renewed interest” from investors – including potential trade and private equity buyers – for the branches, which have 1.8 million retail and 240,000 small business accounts.

It said: “The group is reviewing all options for feasibility, ability to execute and a fair outcome for all stakeholders. In parallel with this, RBS is creating a standalone banking entity that would facilitate a trade sale now or at some point in the future, or an IPO.”

The bank is to ask the European Commission for an extension to its deadline of finding a buyer by the end of year because of the time it will need to fully separate the business. Industry sources said the “standalone” model, which RBS used with Direct Line before floating off a stake in the insurer last year, would help the group to keep all it options open.

One said: “Even if they were working towards an IPO in a couple of years’ time, trade buyers may well come along once they have this fully separated business, because it won’t have any difficulties in separating out the IT systems.”

Outgoing Bank of England governor Sir Mervyn King said earlier this week that there were “powerful” argument in favour of breaking up RBS.

He told the parliamentary commission on banking standards that it was “not beyond the wit of man” to split off RBS’s bad assets so it can build up capital at the remaining “good bank” and lend more.

King, who will be succeeded as Bank governor by Canadian central banker Mark Carney in July, said: “The whole idea of a bank being 82 per cent owned by the taxpayer, run at arm’s length from the government, is a nonsense.

“The arguments for restructuring sooner rather than later are powerful ones.”