Standard Life could sell bank to Barclays for up to £300m

Published on Sunday 27 September 2009 21:51

INSURANCE giant Standard Life is in advanced talks to sell off its bank subsidiary to a major UK clearing bank. Standard Life Bank, which earlier this year was merged into its financial services division, could raise between £200 million to £300m, with Barclays Bank considered a lead contender to buy it.

Anne Gunther, the former chief executive of the bank, left in February of this year, re-igniting rumours the bank was ripe for sell off. Management of the division, which has savings and mortgages worth 14.3 billion, has since been overseen by Standard Life head of customer management John Gill. The sell-off would be a sop to Standard Life investors who have questioned the merits of running a bank as part of its operations since the group floated in the stock exchange in 2006.

The sell-off is being driven by finance director David Nish, who is considered a forerunner in the race to be the next chief executive of the group, replacing Sir Sandy Crombie. An announcement on the chief executive's role is due in the next few weeks.

An industry insider said: "Getting shot of it (the bank] makes it a cleaner, stronger group which is more focused on where it wants to be. It is a move that Nish would want to inspire and would be seen as a strong move in the City as well."

The bank employs 300 staff in Edinburgh. In May, the insurance group said it aimed to cut 75m from its costs by 2010.

The latest reported figures showed savings at the bank were up to 5.5bn, with 1.8bn of this attributed to funds in the insurer's SIPP and wrap investment and pension products.

Recently the insurance group had all but stopped the bank's mortgage-lending business. In the first six months of the year new mortgages had been slashed by 80 per cent. In the first half of the year its mortgage book stood at 8.8bn, down from 9.7bn at the end of 2008 with only 143m of mortgages written in 2009.

A "big four" accountancy firm, reported to be PricewaterhouseCoopers, is undertaking diligence on the value of its assets.

The bank was founded in 1998, a pioneer of telephone banking, offering personal and business savings products at high interest rates, dubbed loss leaders by critics. In January 1999, the firm entered the UK mortgage market.

The bank was the brainchild of former Standard Life managing director Scott Bell. It was launched by Jim Spowart who had previously been involved in the establishment of the Royal Bank of Scotland's telephone insurance business, Direct Line.

In its early days, the insurer had ambitions to take on high street rivals like RBS and HBOS. In 2006, the bank hit its apogee, contributing its first 40m dividend to the group after it had implemented a focus on "higher margin business."

In 2007, underlying pre-tax profits had slid 16 per cent to 32m which led to initial claims the insurance group no longer considered it core to the business and that it should be sold.

Before he left the insurance group to run rival Friends Provident, former director Trevor Matthews had overseen the creation of its financial services division, which included the bank, in order to include mortgages in its wrap investment platform.

A spokesman for Standard Life declined to comment.