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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  • Comment number 137.

    All this user's posts have been removed.Why?

  • rate this
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    Comment number 136.

    Surely it is worth waiting for a higher price - aftrer all the Williams & Glyns pedigree tended to attract a higher quality of customer so you would expect this part of the RBS Group to be the premium face of high street banking.

  • rate this
    0

    Comment number 135.

    @134 John M
    Do you have inside knowledge of that are or you just repeating myth, rumour or very secondhand received wisdom?

  • rate this
    0

    Comment number 134.

    The root of the problem is "Mark to unicorn" rather than "Mark to Market".

    All the banks are pretending that their "assets" are worth far more than they are.

    As such they are trading while insolvent - a crime under UK law. This criminality has persisted for five years - and STILLl no-one has gone to jail...

    Pathetic!

  • rate this
    0

    Comment number 133.

    @128 sw
    What property assets are you refering to?

    If it's the Bank's own properties, it will only have a problem with them when it needs to sell, when leaving them. If you are refering to the mortgage lending, whether commercial or domestic, again the Bank doesn't 'own' the properties: its exposure relates only to the outstanding loan set against the present value of the individual property.

  • rate this
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    Comment number 132.

    Re a 'bad bank'. Assets transferred to a bad bank are not worthless as the case of Northern Rock shows where, as yet, bad debts of the mortgages are about the same as building societies.

    An assessment should be made of RBS's bad assets.

    The EU Competition Commissioner in 2009 ordered selling Branches to promote competition. Robert should tell us what the EU position is now?

  • rate this
    +1

    Comment number 131.

    Further to my previous comments on RBS's assets it is no accident that Hester was made CEO.
    Hester was previously head of British Land and so his experience is in real estate - especially commercial real estate.
    He was employed as the most qualified person to manage the extensive commercial property holdings of the bank.

  • rate this
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    Comment number 130.

    There are no William and Glynn client. As I understand it the name is to be acquired by the consortium together with the branches. William and Glyn was set up by RBS to take over the branches of its the subsidiaries, Williams Deacon's Bank Ltd and Glyn, Mills & Co in 1985

    Until thenI was a customer of Glyn, Mills & Co. For various reasons my branch still has its historic name dating from C16th

  • rate this
    +1

    Comment number 129.

    #128. sw

    That is precisely why the banks need to re-inflate the house price bubble.

    Without suckers taking loans out to buy over expensive property the bank owned property plummets in price.

    But the banks cannot sell them off cheaply...
    Else the banks make a loss.

    And so we have to bail them out....
    Then some spiv company is gifted the assets.
    And waits for a bubble to form. Making a killing..

  • rate this
    0

    Comment number 128.

    One of RBS's problems is that many of its assets are marked at too high a value.
    It surely needs to sell some of these assets but if it did then the prices it probably realise would be much less than that which appears in the published accounts.
    These dodgy assets therefore need to stay on the books at the make-believe marks.
    The bank is sloshing around in assets that it cannot sell.

  • rate this
    0

    Comment number 127.

    30.
    Universityoflife
    Any fool can run a bank and pay themselves bonuses when the risks are all underwritten by the taxpayer. The last 5 years is evidence enough. So the argument that "we have to pay the best to get the best" is a load of manure put about by those in the Financial Services and banking "industry".

  • rate this
    0

    Comment number 126.

    Gideon & call me Dave are very keen to sell of anything before the next election to buy votes from the sheeple the same as Thatcher did. The Foreign Secretary is doing his best to get us involved in another war, and some fool yesterday was claiming our exports were improving. I was'nt aware that exports included war and dodgy banking deals.

  • rate this
    -2

    Comment number 125.

    I thought Politicians satisfied themselves with rewriting history

    Now it seems Cameron wants to rewrite reality.

    http://www.bbc.co.uk/news/uk-politics-21714549

    What a nasty man. Leading the nasty party no less.
    If the facts don't fit. Simply change them.
    Nasty.

    Obviously he needs a spot of tutoring from Murdoch.
    He would set him right.
    What do you mean he has swapped Horses.
    Backing UKIP. Ney?

  • rate this
    0

    Comment number 124.

    90

    The BoE shareholders are the Government and only the Government. So I assume you want all the bad stuff of RBS left with the Government which means the taxpayer picks up the bill since Governments have no money.

  • rate this
    0

    Comment number 123.

    If savvy people want to buy these assets, then its pretty clear they are the ones the taxpayer should hang on to until the whole group is valued at a profitable level.
    It sounded like a rip off when first announced and now we know the causation its a dead cert!

  • rate this
    0

    Comment number 122.

    113

    And what exactly has pay at Barclays got to do with a possible sale of RBS?

  • rate this
    +1

    Comment number 121.

    RBS as it stands is effectively The Undead... It's a failed company that hasn't stopped breathing.If these guys want to buy these branches let them. There's no future in retail banking as it stands. Fixed branch costs, aging staff population, newer ways of doing business eg Paypal Bitcoin etc and restrictions on risk taking will kill the big banks in 15-20 years. You heard it here first...

  • rate this
    0

    Comment number 120.

    "The morals of this country are no better than than 3rd world countries who's few elite fleece the many!"

    Indeed. But who do you think taught third world countries these morals in the first place?"

    I've often thought this. While the rest of us were appalled by the 3rd World kleptocracies the City - which handled all that money - decided they would do exactly the same.

    Thats what they have done

  • rate this
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    Comment number 119.

    Cutting to the quick. Does the UK population, non banking taxpayer, want to support the banking sector, in perpetuity?

    That is what the banks want.

    Flogging these banks off, at great cost to taxpayers, is how the losses are consolidated. Ready for the next time.

    Meanwhile the bankers fill their boots. With our wealth.

  • rate this
    0

    Comment number 118.

    This is better than the 'bad bank' idea, in which we, the taxpayer, would get stuck with it and the 'good bank' gets sold off, well to somebody like this lot. I always thought that when the RBS break-up was first mooted that this would be the way to go. The Halifax former building society should be next. And these 'pieces' should be sold off warts and all, their delinquent loans as well.

 

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