Church of England backing RBS branch bidder

Mervyn Davies is heading a group looking to take on some RBS branches. Picture: Getty

The Church’s Commissioners investment body, which manages some £5.5 billion of assets, is understood to be looking to put millions of pounds into the consortium led by former trade minister Lord Davies.

The group is eyeing a substantial stake in the 316 branches, possibly as much as 50 per cent-plus, in conjunction with a preferred flotation of the assets by RBS. It is also believed the consortium has not ruled out taking over the branches completely, although this is thought a less likely option.

Analysts said that the Church of England Commissioners’ involvement could enhance the consortium’s appeal to Chancellor George Osborne and the Treasury amid the continuing sector rows about banking remuneration and unethical behaviour.

The precise amount of the Church Commissioners investment is unclear, but sources familiar with the situation said it was likely to be in the millions of pounds. The Church of England and RBS declined to comment yesterday.

Other members of the consortium are said to include Corsair Capital, a private equity firm where Lord Davies is a partner; Centerbridge, an American investment firm; RIT Capital, a vehicle headed by Lord Rothschild; and Standard Life, the life assurance and pensions group.

It is understood the consortium has one main rival for the branches, an offer backed by more than 20 City institutions, including Foreign & Colonial, Schroders and Threadneedle Investments. Due diligence on the assets being sold or floated is currently going on.

RBS was ordered by the European Commission to divest the branches in return for its £45 billion taxpayer bailout, but lengthy talks with Santander on a transaction broke down last year through a mixture of price and IT issues.

The latest annual report of the Church Commissioners shows that in 2012 it had £991m of investments in quoted UK equities, and £1.5bn in quoted overseas equities.

According to the report, the private equity element of its portfolio achieved a return of 2.9 per cent last year, while it made new private equity commitments of nearly £25m.

Among its holdings are shares in Barclays, and, up until last August, it had 9.3 million shares in Rupert Murdoch’s News Corp, but divested the latter because of concerns about corporate governance and in the wake of the fallout from the hacking scandal that saw the closure of the News of the World.

Despite holding the Barclays shares, the Commissioners said in the recent annual report of its ethical investment advisory group that the bank’s involvement in Libor-rigging showed that it had “lost sight of its fundamental role in society and its wider obligations”.

The self-styled “ethical” Co-op Bank’s bid for more than 600 Lloyds’ branches – a sell-off also demanded by the EU – collapsed recently amid concerns about a £1.5bn hole in the mutual’s balance sheet.