Sir Richard Branson pulls Virgin out of race to buy RBS branches

Published on Saturday 8 May 2010 15:02

SIR Richard Branson has been told he is out of the race to acquire more than 300 branches of Royal Bank of Scotland, leaving National Australia Bank, owner of Clydesdale, as one of two likely winners in the auction.

• Sir Richard Branson was told on Friday that Virgin was no longer in the running to buy the RBS branches. Picture: Getty

NAB, which also owns the Yorkshire Bank, is now a leading contender with Spanish giant Santander. BBVA, the other Spanish bank in the process, is also thought to be an outsider.

It is understood that Santander has offered the highest price – at least 2 billion – and that this could be the deciding factor over any pledges on preserving jobs and maintaining the 318 outlets.

They are being sold on the orders of the European Commission as a condition of RBS receiving state aid following its collapse in the banking crisis.

Virgin was told on Friday that it was no longer in the running despite giving assurances on jobs and branches. It is thought to have submitted a bid in the region of 1.5bn. A joint bid by Wellcome Trust and Blackstone was the first to be ruled out. It is thought RBS will be providing the final bidders with access to data within the next few weeks.

Santander is still regarded as the frontrunner, as it has been since RBS was ordered to sell the branches last year. It has been vocal in expressing its expansion plans and is keen to develop its business banking operations. Acquiring the RBS network, being sold under the revived Williams & Glyn's brand, would double its share of the small business banking market.

The government is keen to encourage new entrants to the banking market as one response to the crisis. But rather than being new businesses, there is a growing acceptance that they are likely to be established players with a low profile in the UK.

Santander and NAB meet that criteria and while price will be a key determinant in whoever wins, there is a view in the industry that the government will want to avoid inheriting any potential problems.

Sources have expressed concern about any impact on Santander from the troubles afflicting the Spanish economy. There are also potential job implications as it may use its existing IT network and back office functions to strip out costs.

This lack of established infrastructure is thought to have counted against Virgin and may also be a factor if it bids for Northern Rock or the branches being sold by Lloyds TSB Scotland.

Wilbur Ross, the billionaire US investor, was willing to invest up to 100m in backing Virgin's bid for the RBS assets.

Stephen Hester, chief executive of RBS, has expressed hope of selling the branches by the end of this year although he is now said to have admitted that it may be delayed until next year due to complications in unwinding the bank's small business customers.