The Church of England-backed consortium behind a £600 million deal to spin off 314 Royal Bank of Scotland branches has vowed to “restore faith” in the banking market.
Led by private equity group Corsair, the investors will return the Williams & Glyn’s brand to the high street after a break of almost 30 years as they prepare for a flotation of the business.
The float is expected to take place in 2015 or the following year, said John Maltby, the former head of commercial banking at Lloyds Banking Group, who has been lined up as chief executive of the business. RBS has been forced to sell the branches under European rules.
Sir Philip Hampton, chairman of the state-backed lender, said: “Williams & Glyn’s will play an important role in the UK banking landscape and will be an excellent new addition to the market, with a particular strength in small business banking – a sector that is so crucial to the UK’s economic recovery.”
The consortium is buying a £600m bond from RBS, which will pay interest of between 8 and 14 per cent, and this will be exchangeable for a “significant interest” in Williams & Glyn’s at the time of its flotation.
Corsair’s vice-chairman, Lord Davies of Abersoch, said: “This will enable existing RBS shareholders to benefit from the increase in the value created by what I think will be fast-growing challenger bank.”
RBS chose the Corsair consortium after ruling out an offer from W&G Investments, a group of investors led by former Tesco Bank chairman Andy Higginson, who said: “We are disappointed that our final proposal was not accepted by the board of RBS as we believed it offered full and fair value for the assets on offer and would have provided certain value to RBS shareholders.”
It is not yet known when the Williams & Glyn’s brand, which disappeared in 1985, will return to the high street. It comprises 308 RBS branches in England and Wales and six NatWest branches in Scotland, with a total of 1.4 million retail account holders and 236,000 small business customers.
The business has £19.7 billion in loans and £22.2bn in customer deposits, giving it a 2 per cent share of the retail market and 5 per cent of the small business banking sector.
Maltby said: “We are committed to high standards of business ethics, and our aim is to help restore the faith in retail and business banking.
“Williams & Glyn’s is going to be free from the legacy issues that are hanging over many other banks – it doesn’t have the legacy of mis-selling payment protection insurance. It will maintain a low-risk profile by focusing only on commercial and retail banking.”
Rival challenger bank TSB, which was spun off by Lloyds earlier this month ahead of a planned flotation next year, has also make a clean break.
As well as Corsair and the Church Commissioners for England, the consortium includes private equity house Centerbridge and Lord Rothschild’s RIT Capital Partners, while Edinburgh-based Standard Life Investments is also in talks about coming on board.
Andreas Whittam Smith, first estates commissioner, said the church’s investment arm was “excited to have the
opportunity to be involved in creating a UK challenger bank operating to the highest ethical standards”.