Saudi banking merger gives boost to RBS

Ross McEwan pleased this merger has concluded. Picture: Ian Rutherford

The group said that the completion of a tie-up between Alawwal bank and Saudi British Bank would lead to it shedding £4.7 billion of “risk weighted” assets while boosting its core capital.

RBS, through Dutch subsidiary NatWest Markets NV, was part of a consortium including NLFI and Banco Santander that held an aggregate 40 per cent equity stake in Alawwal.

The Scottish lender said that as a result of the merger completion, it would recognise an income gain on disposal of the Alawwal bank stake for shares received in Saudi British Bank of £400 million and a reduction in risk weighted assets of £4.7bn. The deal will also eliminate legacy liabilities amounting to £300m.

RBS, which was rescued in 2008 with a £45bn-plus bailout from the UK taxpayer, has been shrinking its overseas operations to focus on its core UK business.

Chief executive Ross McEwan said the completion of the Saudi banking merger would help RBS to focus on its target markets.

He told investors: “We are pleased that this merger has now concluded; it will help facilitate the future exit of our shareholding as we continue to focus on our key target markets.

“The release of capital will also have a positive and material financial impact for RBS.”

The changes will lead to an increase in the bank’s CET1 core capital ratio of 60 basis points, RBS noted.