In Depth

EC sounds positive note on RBS plan for Williams & Glyn

'Preliminary analysis' brings fresh hope that bank will not have to sell 300-branch unit

Brussels could block Santander's buyout of RBS unit

04 August

Royal Bank of Scotland may "face a battle" to get backing from officials in Brussels for a sale of its Williams & Glyn spin-out to Santander, says Sky News.

Sources claim the Spanish bank's renewed bid specifically excludes "small chunks" of the unit, which could run contrary to the European Commission's demand to offload the entire business.

The excluded elements are said to be "incompatible with Santander's IT systems". It is understood the issue relates to corporate banking customers.

Williams & Glyn is made up of 300 branches of RBS and NatWest, with 1.8 million personal banking customers and 250,000 business clients. 

RBS, which remains 73 per cent taxpayer-owned, was told to offload the business under EU state aid rules relating to its £45bn crisis-era bailout. If could face "further sanctions" if it accepts Santander deal and is deemed not to have complied with the European Commission's original demand.

RBS bosses are expected to give an update on the progress in separating Williams & Glyn in its half-year results on Friday. They are not, however, expected to give detail on the new offer.

The sell-off has hit a number of IT snags over the years that have cost £1.2bn. Santander originally struck a £1.65bn deal to buy the business in 2010, but walked away in 2012 over prolonged delays relating to the IT problems.

It remains possible that RBS may still revert to a plan to list Williams & Glyn on the London Stock Exchange, perhaps with the support of private equity groups. Other trade buyers may also surface to challenge Santander.

Many City experts believe the spin-out's "relative attractiveness to buyers has improved" since the EU referendum as margin pressure will force challenger banks to consolidate.

Santander renews interest in buying RBS spin-off

03 August

Santander has re-emerged as the would-be buyer of a 300-branch spin-out from rival the Royal Bank of Scotland (RBS), four years after it walked away in frustration from an agreed deal.

The Spanish bank is understood to have made a fresh takeover offer for the Williams & Glyn unit, which the European Commission has demanded RBS offload by the end of next year, says The Times.

No transaction is thought to be imminent, but the talks were described by one source as "serious".

Sources close to RBS confirmed the offer to the BBC's business editor Simon Jack and said it was under consideration.

Santander initially struck a £1.65bn deal to buy Williams & Glyn in 2010, with a view to completing by 2011. However, it abandoned the plan in 2012 after IT problems prompted repeated delays.

Technology issues remain and RBS is thought to have pumped £1.2bn into efforts to set up a new platform to house the 1.8 million personal customers and 250,000 business clients that will be moved across to than offshoot.

But in what The Times describes as a potential "embarrassment", it is thought the revised Santander approach will involve customers being instead moved onto its existing IT infrastructure.

European officials have demanded RBS offload the branches as a condition of it receiving more than £45bn in state aid through its crisis-era bailout. A 2014 deadline has already been missed, while another for the end of this year has been extended.

Lloyds was similarly forced to dispose of hundreds of branches, leading to the listing of TSB in 2014. It was bought for £1.7bn by Spain's Sabadell banking group last year.

RBS had been focussing on floating Williams & Glyn, an option the BBC's Jack says remains in the running.

However, in April, the bank said it was assessing the alternative of a trade sale, with Santander, Virgin Money and BBVA of Spain touted as potential suitors.  

RBS spin off – and return to dividends – held up by six Natwest branches

16 May

Royal Bank of Scotland may miss another European Commission deadline to offload more than 300 retail branches and take even longer to return to dividend payouts, in part because of a technology conundrum posed by just six Natwest branches.

Bloomberg reports that the £1.5bn project to spin out a challenger bank, under the revived Williams & Glyn brand that disappeared from UK high streets in the 1980s, has hit a number of technological snags that hamper its ability to transfer 1.8 million individual and 250,000 business accounts.

In particular, it cites the problems being caused by "the handful of NatWest branches in Scotland, including one in the hometown of national poet Robert Burns, that operate on different systems than the rest of the unit".

RBS was originally told to get rid of the branches in a 2009 ruling related to the state aid received as part of a financial crisis bailout. A deal with Santander struck in 2010 fell through in 2012 and a deadline to complete the divestment by 2014 has already been missed. Now the revised 2016 target looks in doubt – and that in turn threatens to undermine a return to investor payouts.

Investors have already been told not to expect dividends to resume until at least the first quarter of 2017. If the disposal is not completed until the end of that year, as per a warning last month, this is the earliest that distributions would be restarted.

"The delay of the spin-off kicks dividend payments into the long grass, and probably means investors will have endured a decade-long dividend drought before the bank starts making payments again," Laith Khalaf, a senior analyst at Hargreaves Lansdown, said.

At the moment, prospective buyers from Santander (again) to Virgin Money have said there is nothing yet that could be viewed as a potential purchase – and the Daily Telegraph reports that to convince the European Commission of its honourable intentions the bank is still considering a range of options.

At one end of the scale this would include the route that Lloyds took with TSB of allowing the new bank to initially use the existing computer system, or finding a buyer with a similar system that could take on the branches easily. At the other end there is the "radical" option of including Natwest as part of the sale to "create a truly enormous challenger bank".

This latter is seen as unlikely, but that it is even being discussed at all "indicates the scale of the challenge in establishing W&G as an independent bank – and the steps those involved in the scheme are taking to ensure they really have considered all their options".

RBS branch sale could attract bid from Santander UK

17 December

Spanish banking group Santander's UK arm is one of a number of brands that is being linked to a purchase of more than 300 Royal Bank of Scotland branches.

Sky News reports that Santander UK and Virgin Money could be interested in buying the Williams and Glyn business that is being spun out of RBS. The unit consists of 307 branches, which are being sold to comply with a European Union state aid ruling related to the government's 2008 banking bailout. It will be the seventh largest bank in the UK, with customer deposits of £24bn.

RBS is still planning a listing of the business at the end of next year, which has been its position since earlier talks with Santander broke down in 2012. But it has admitted it is now going to be running an auction alongside these plans, with a view to opening the options to extract the best value from the disposal.

A sale of the business has been reported as being likely to bring in around £1.5bn. The divestment must be completed before the end of 2017 to comply with the EU ruling.

Sky News says Virgin Money, which has a current market value of £1.7bn, would probably need to raise additional capital to facilitate a sale. Herald Scotland says other banks that are rumoured to be interested in a private sale of Williams and Glyn are National Australia Bank-owned Clydesdale and Spains BBVA and Sabadell, which last year bought Lloyds spin-out TSB for £1.7bn.

RBS shares have been rising today in the wake of the reports of a trade sale, gaining two per cent to 296p.

RBS 'challenger' bank could attract £1.5bn buyout bid

15 December

Royal Bank of Scotland's soon-to-be-spun-out retail bank arm Williams and Glyn could be the subject of a £1.5bn buyout bid, reports Bloomberg.

The unit is currently being lined up for a stock market listing as soon as the early months of next year. It must be divested no later than the end of 2017 in order to comply with a European Union ruling relating to RBS's 2008 bailout.

Bloomberg did not name the interested parties, but it said "British and European banks have signalled interest" in buying the business. RBS said only that it continues "to focus on achieving the best possible outcome for customers and shareholders".

Williams and Glyn was a historic banking brand established in 1970 when the English and Welsh subsidiaries of RBS were formally combined. It was absorbed within the larger bank in 1985, but the name has been resurrected for a new bank consisting of more than 300 branches that RBS is being forced to sell under European 'state aid' rules.

These regulations are designed to prevent countries in the EU from giving an unfair advantage to large institutions. A similar ruling was handed down in relation to Lloyds, which was also bailed out during the financial crisis, and led to the re-entry of TSB as a brand on the UK high street.

Williams and Glyn will be one of the largest so-called "challenger" banks taking on the established sector names, with close to two million customers and £23bn in customer deposits. Under its listing plans, it raised £600m from a group headed by private equity firms Corsair Capital and Centerbridge Partners, who will own a collective 49 per cent of the share capital.

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