Of Special Interest


[x] [x]

23rd October 2012

Three parties interested in RBS branches

Royal Bank of Scotland is said to have received three expressions of interest in the branches and loan portfolio that Santander has withdrawn from acquiring. Various media suggest the three interest parties are JC Flowers, Nationwide and Virgin Money.

The new name added over the weekend was Nationwide, the country's largest building society. Nationwide is the only of the three to have a significant branch network, and is the only clearing bank member. It is one however that is predominantly personal banking. As a mutual it would also have more difficulty in raising additional capital in the Basel III environment.

The RBS portfolio of 316 branches for sale has a strong weighting towards SME businesses. One of the purposes of the forced sale was to reduce the RBS dominance of the SME sector. Virgin Money, due to its acquisition of Northern Rock, has a network of around 64 branches, again one made up almost entirely of personal customers with few businesses. JC Flowers has no UK branch network though has joint ventures with some small building societies.

Although the plan is for some staff to transfer with the branches and portfolio and some systems also there would be many difficulties faced by all of the three contenders. Not least would be the absence of experience by top management in SME lending.

RBS was tasked with completing the sale before the end of 2013 by the European Commission. Even should the EC extend this deadline by a year it would appear a difficult task for any of the three above to achieve.