Santander leads race for £4bn RBS branches

Published 08th Mar 2010

Santander has moved into pole position to take over the 320 branches in England being sold by Royal Bank of Scotland.

A large corporate buyer with existing UK interests such as the Spanish bank would frustrate attempts to inject fresh competition into British banking.

The sale memorandum went out last week, but it emerged over the weekend that any buyer would have to find an extra £3 billion as well as the mooted price of £1 billion. The business, which is being marketed as the old Williams & Glyn’s branch network, is dependent on £3 billion of emergency funding from the Bank of England, part of the rescue package provided to RBS and the rest of the banking sector. A buyer would have to replace this with fresh funding within weeks.

A purchaser would also require about £2 billion in capital to support the £24 billion loan book. None of those involved would comment, including Santander — which bought and rebranded Abbey in its own name — and Virgin Money and National Australia Bank (NAB), which are possible bidders.

Nevertheless, one person close to the negotiations said: “To replace that [funding] is going to be difficult, for most people don’t have deep pockets or the ability to access the market.”

Virgin has made clear that it is still in the race, but doubts are growing about the willingness of NAB, which owns the Clydesdale and Yorkshire banks in the UK, to do a deal. BBVA, Spain’s second-biggest bank, has also been mooted as a bidder.

Vince Cable, the Liberal Democrat Treasury spokesman, and others have said that the branches should go to a new entrant rather than boosting the market share of an existing player.

However, a banking figure said: “It’s a question of whether Cable and the others are right in thinking there’s a queue of people wanting to get into the banking sector.”

The government funding drops out next year — it would have to be replaced by whoever owned the network then in any event. There are hopes that the deal may be reshaped to take this funding gap into account. RBS, which is 84 per cent-owned by the taxpayer, has set a deadline of the first week of April for initial bids, but Stephen Hester, its chief executive, has emphasised that the bank has until 2013 to do the deal and that it could be delayed if a good enough offer were not put forward.

The European Commission announced the forced sale last summer as a consequence of the state aid given to RBS. Lloyds, another recipient of state aid, is also having to make disposals.

Virgin Money is not thought to be concerned about the capital requirement. But it has also pointed out that RBS is not the only deal at the moment and has expressed a strong interest in acquiring the “good bank” side of Northern Rock.

Over the weekend NAB was reported to be going cold on the deal. Cameron Cline, its chief executive, has said that the bank has received approaches for its British business, sparking suggestions that these could be sold instead. A spokesman declined to comment on “speculation”.

Williams & Glyn’s disappeared as a brand more than 20 years ago, but the name, which has been kept as a legal entity that files accounts at Companies House, retains a degree of recognition among older members of the public. Thus any buyer fresh into the banking arena could be keen to acquire the name.

Santander emerged from the recent round of 2009 banking results as the most successful retail bank in the UK, notching up attributable profits of £1.54 billion.

Source: ' Times '

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