RBS looks for another buyer for 316 branches as Santander walks away from £1.65bn deal

Royal Bank of Scotland

Royal Bank of Scotland

The planned sale of 316 Royal Bank of Scotland branches to Santander has collapsed as the Spanish partner walked away from £1.65 billion deal nearly two years after it was agreed. Royal Bank of Scotland, the state-backed bank, is forced to search for a new buyer.

The Sale of Royal Bank Branches Collapsed

The deal regarding the sale of the Royal Bank of Scotland branches collapsed as it turned out that the whole process proved to be more difficult than initially had been expected. Spain’s Santander informed that it was unwilling to once again extend the deadline when it realized that the deal would not be completed in 2012. Certainly, the information on the collapse of the deal leaves in limbo approximately 1.8 million customers who were prime to transfer from the Royal Bank of Scotland branches to Santander.

Santander UK agreed to buy the Royal Bank of Scotland branches in August 2010. Antonio Horta-Osorio, then chief executive officer at Santander UK, agreed to buy Royal Bank of Scotland branches for roughly £1.65 billion, based on the value of the net assets.

However the proposed deal encountered problems and delays. One of the main problems was to integrate the Royal Banks of Scotland accounts with Santander’s computer systems. And because of technology and separation issues the Spanish Santander decided to walk away from buying the Royal Bank of Scotland branches. Ana Botin, chief executive officer at Santander UK, noted: “We have concluded that given delays it is not possible to complete this within a reasonable timeframe.”

RBS in search for a new buyer

Royal Bank of Scotland was forced to sell the branches, mainly in the England and Wales, by the European Commission as the result of accepting state aid in its £45 billion bailout. Royal Bank of Scotland accepted the government’s help in 2008.

Stephen Hester, chief executive officer at Royal Bank of Scotland, noted that the branches were the profitable part of the bank’s business and that the bank did everything within its power to guarantee it was substantially separate from UK branch. He added, that the branches were “ready to be taken on by a new owner.”

Stephen Hester is expected to restart the sale process of the Royal Bank of Scotland branches immediately. According to sources familiar with the matter, Royal Bank of Scotland is confident to reach a new deal on the sale of the Royal Bank of Scotland branches before the EU deadline at the end of next year.

It is being speculated that other prospective buyers of the Royal Bank of Scotland branches include Sir Richard Branson’s Virgin Money,  which took over Northern Rock, NBNK and Co-operative Bank, which acquired over 600 branches from Lloyds Banking Group. Analysts also believe that Royal Bank of Scotland might decide to spin its branches off as separate company to start the flotation.

Moreover it is said Royal Bank of Scotland could also be forced to ask for an extension of the deadline as some analysts are convinced that the bank might struggle to find a new buyer for its branches. Royal Bank of Scotland is even said to be forced to accept a lower price.

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Richard Meryn
Richard Meryn, Associate Editor Industry Leaders Magazine (www.industryleadersmagazine.com)

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