Santander has reportedly pulled out of talks to buy more than 300 branches from Royal Bank of Scotland – for the second time.
State-backed RBS has to offload the branches by the end of next year as a condition of the £45 billion bailout it received at the height of the financial crisis.
The Edinburgh-based group had been planning to float off the business under the old Williams & Glyn brand, but has now focused its efforts on sealing a trade sale.
Santander abandoned a £1.65bn deal for the branches in 2012, before returning to the negotiating table earlier this year. However, it has been reported that talks with Santander have broken down because of a disagreement over the price of the Williams & Glyn branches.
RBS last month reported a loss of £2bn for the first half of the year, compared with a £179m loss a year earlier, after being hit by extra restructuring costs and an increased bill for mis-sold payment protection insurance.
Analysts have speculated that CYBG – the Glasgow-based owner of Clydesdale and Yorkshire banks – may be interested in buying the 300-strong Williams & Glyn network. Santander has also reportedly left the door open to return to the negotiating table for the right price.
But analysts said RBS faces the prospect of making losses on the Williams & Glyn sale in a “long and painful” saga.
Neil Wilson, markets analyst at ETX Capital, said it was “fresh humiliation” for RBS, adding: “Santander might just be playing hard ball and wants to remark these assets.
“Brexit has undoubtedly played a part. With all sorts of questions about the state of UK financial services hanging in the air in the wake of the referendum, it’s hard to really say what Williams & Glyn is worth. Whoever buys it, it’s likely to be for less than the £1.9bn RBS wants.”
RBS has already spent more than £1.3bn trying to offload the Williams & Glyn network, having at one stage planned to spin it off as a standalone bank.
Ian Gordon, banking expert at Investec, said: “RBS is in a weak negotiating position with a forced disposal deadline of the end of 2017.”
He said there was hope of a deal with a trade buyer, adding that CYBG is a strong possible suitor, but he raised concerns that the price would sink below the costs already spent on Williams & Glyn. “It’s a long and painful story that doesn’t have a light at the end of the tunnel,” he added.
Santander had reportedly put forward a formal offer last month. Its latest move to pull out of talks comes after it abandoned a £1.65bn deal to buy Williams & Glyn in 2012 due to the complications of separating out the IT systems.
RBS had since hoped to list Williams & Glyn separately on the stock exchange, but last month said it was scrapping these plans as even lower interest rates would make trading tougher for a small-scale challenger bank.
RBS, which is still 73 per cent owned by the UK government, has to offload the branches to meet EU rules on state aid.
The Treasury said that, despite the Brexit vote to quit the EU, the UK is still a member of the bloc and would be expected to “fulfil its obligations”. Santander, RBS and CYBG declined to comment.