Investors want to buy RBS's Williams & Glyn's

 
RBS sign

Royal Bank of Scotland has received an approach from 17 of the biggest investment institutions to buy 315 branches and their associated 2m customers for around £1bn - with a view to creating a serious new player in small-business banking.

I've only been back for four days, and this is the second time I am banging on about Royal Bank of Scotland.

Now I don't know whether that says more about the bruised largely nationalised bank or about me, but either way it may not be healthy.

What has been brought to my attention is an interesting new way to hive off the 315 RBS branches, which the bank was on course to sell to Santander, before the UK arm of that Spanish giant dropped the deal.

RBS is not allowed to keep the branches and their £20bn-odd of deposits and loans - together with 1.7m retail customers and 230,000 small-business clients. The European Commission has ordered the disposal, as a remedy for the state aid received by RBS when British taxpayers bailed it out in 2008.

And here's the thing: the deadline for the sale is November 2013 - though, arguably through no fault of its own, RBS has acknowledged that it is going to miss that deadline.

Or perhaps it might not, if it and the government like the look and smell of a proposal being put to it by 17 very substantial investment institutions, including Schroders, Threadneedle, Foreign & Colonial, Henderson and Invesco Perpetual.

I have learned that together with a sovereign wealth fund, a substantial hedge fund and so-called family money, they've been brought together by Baden Hill and Canaccord to make an offer for the branches.

They've collectively committed £700m, which in a sense was the entry price for getting access to confidential data about the branches, assets and liabilities. And they would expect to eventually make an offer of around £1bn - which is less than Santander had put on the table, but probably more than any other current proposal.

The reason any of this matters is that what is being sold is largely a small-business bank - almost two-thirds of its loans are to businesses, especially smaller ones - and right now one of the alleged great scandals of the British economy is the great shortage of choice for small businesses in the provision of vital finance.

Now you may wonder how on earth these investment funds would propose to run this hived-off bank, which - by the way - would trade under the famous Williams & Glyn's name (many of the branches being sold originally had that moniker).

Well they've recruited the man who set up Tesco's fast-growing bank, Andy Higginson, who was finance director of Tesco for years, as their Williams & Glyn's chairman. As for executives, and risk controls and technology, RBS has already committed to provide all of that.

However, right now Williams & Glyn's is in no fit state to be separated from RBS. And it may take a couple of years for the systems to be in place for it to be detached from the mother ship.

This is how RBS puts it, in its recent results statement:

"RBS is creating a standalone banking entity supported by a bespoke technology solution that would facilitate a trade sale now or at some point in the future, or an IPO (flotation on the stock market)."

It seems to me that the best way of seeing what the investment institutions are proposing is as a short cut to something that's not a million miles from an IPO - since these are exactly the kind of funds that would buy the shares in a stock market flotation.

And the advantage for RBS of their plan is that it can have most of the money almost immediately, rather than having to wait two or three years for the IPO.

The disadvantage of course is that the business could be worth a good deal more, as and when it was floated - and that matters to taxpayers, since we own more than 80% of RBS.

I suspect it may come down to politics, and whether early privatisation of a strategically important part of RBS were to appeal to the chancellor.

 
Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this
    +2

    Comment number 17.

    The treasury needs to get RBS back on a stable footing and then sell off their shares. If they wish to dabble in the banking business they already have a ready made vehicle in the form of the post office and the giro bank. A simple step with more counter branches than any other bank. And what is more it has a strong market reputation, it was not tarnished in the crash. TBC...

  • rate this
    +8

    Comment number 16.

    One minute we hear that it requires a genius paid a fortune to make money in banking & finance; the next that there's a queue to take over the activities of a broken bank.

    A cynical person might think the attraction is that whatever you do in banking, no matter how risky or incompetent, you just can't lose.

  • rate this
    0

    Comment number 15.

    Why do toxic banks do better than 'normal' banks?

  • rate this
    +2

    Comment number 14.

    12. Ethicalism
    Not sure what your point is. RBS is a Scottish bank based in Edinburgh. Not London.

  • rate this
    +5

    Comment number 13.

    Mmmmm - conspiracy theories aside - wonder if the story yesterday about the possible sale of Coutts & the computer glitch last night were anything to do with softening us up to the inevitable cheap sale of all the best bits of RBS?

    - inevitably leaving us with the dross and no return to the taxpayer?

  • rate this
    +8

    Comment number 12.

    A clear opportunity for the government to create a new regional bank, based away from london! An opportunity for the government to influence other banks to change behaviour by creating competition!!!!
    Most importantly a sustainable opportunity for the government to get a "long term" return for the taxpayer rather than handing it over to others for a short term loss!!!

  • rate this
    +4

    Comment number 11.

    RBS had disaster written all over it's face once it tarted mixing balance sheet and investment banking products so heavily. Bonus culture was only part of the problem.
    http://joelghames.wordpress.com/2013/02/14/the-day-banking-died/

  • rate this
    +1

    Comment number 10.

    Really - I wonder who is the foreign exploitative buyer as wanting to raise bank charges and reduce savings rates?

  • rate this
    +9

    Comment number 9.

    It is important that the buyer is not 'chosen', which would result in a cosy deal between mates in the city.

    Make any interested party put its offer in a sealed envelope. The highest wins.

    At least this will establish the true market price and whoever sees the most value in the deal will bid the most.

  • rate this
    +12

    Comment number 8.

    You neednt worry Robert there is no place for a plan that gets the tax payer back their money ,this ,as is always ,about keeping private banks private.

    We will end up with the rubbish.

  • rate this
    +11

    Comment number 7.

    Another tax payer rip-off?
    Some primadonnas want to fly the bonus-restricted coop?
    Well they ponced off the good name of the company when they started off.
    So now they should be stuck with it until we get our money back with inflation-linked interest!

  • rate this
    +6

    Comment number 6.

    @2 Megan
    I've given up hope of a taxpayer return...the RBS bonuses should have been given as a dividend if any order is to return to financial markets.
    But two years to sort W&G, no wonder there was no Spanish Acquistion, there is an urgent need to sort out..

    the mess that is RBS
    no redress they do not impress
    me
    (with thanks to the Square Mile Rapper}

  • rate this
    +10

    Comment number 5.

    So the government will look after those in the financial services sector again (irrespective of whether labour or conservative) while the already heavily burdened taxpayer continues to pay for the mess.

  • rate this
    +16

    Comment number 4.

    Profits will be Private

    Losses will be Public

    Same as it ever was...

    Pathetic!

  • rate this
    +2

    Comment number 3.

    1 billion is cheap but it is clear that the government want to throw away RBS and its bits at a knock down price when so much could have been achieved had they used this priceless opportunity to benefit the economy by setting lending and governance policies to spur competition with other banks and to finance business expansion.

  • rate this
    +13

    Comment number 2.

    But will RBS use the money raised to pay back the taxpayer?

    Somehow the fact that they owe us a lot of money is continually being forgotten. We need to see some clear proposals for how we get paid before they scamper off thinking about their own profit...

  • rate this
    +1

    Comment number 1.

    HURRAAH

    the taxpayer will lose out financially but the economy will benefit....

 

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