RBS back in a tough spot over branch sales
Once again RBS is in a tough spot. It is legally required to sell 315 branches by the end of next year to satisfy EU rules on state aid after the tax payer funded a £45bn rescue in 2008.
That is not a great negotiating position - something thrown into sharp relief by Santander's decision to withdraw from the bidding for a business RBS originally hoped to sell as a new standalone bank under the old Williams and Glyn brand. This is not the first rejection RBS has suffered.
Plans to sell the branches and their associated retail and small business accounts hit the skids back in 2012. Subsequent efforts to carve out a separate bank for public sale foundered on very expensive rocks after hundreds of millions were spent on an unsuccessful attempt to create a brand new bank with its own IT platform.
This latest setback raises the spectre of a fire sale of assets still 73% owned by the government - which means us. Sources close to the process tell me that the breaking point was price.
Here's the thing - banks don't make as much money as they used to. And that affects what they are worth (obvs). The reduction in interest rates to 300 (yes 300!) year lows reduces profit margins between what banks earn on loans and what they pay to savers. Lower profits makes a company worth less.
So what now? The BBC understands that Santander may still be interested but wants to radically reset the price point from the £1.6-1.9bn range previously bandied about.
There are other potential bidders out there - but not many. The company that owns Clydesdale and Yorkshire banks is thought to still be in the hunt. Another potential candidate - the TSB, offloaded by Lloyds under similar regulatory pressure - have up to now ruled themselves out.
There is an outside chance that a private buyer - like US based Corsair Capital - might buy the company with a view to selling in 5 years or so when the rain clouds on banking clear.
What does seem clear is that the price taxpayers will get for something they 73% own has taken another downward turn.