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Categorized | Banks

RBS warns over Williams & Glyn sale


Posted on September 27, 2016

Royal Bank of Scotland Report Biggest Annual Loss For 2013...LONDON, ENGLAND - FEBRUARY 27: Ross McEwan, Chief Executive of RBS (Royal Bank of Scotland) speaks to reporters and investors on February 27, 2014 in London, England. RBS has announced a pre-tax loss of 8.2bn for 2013, the biggest since the bank was rescued by the UK tax payer. (Photo by Peter Macdiarmid/Getty Images)©Getty

Ross McEwan, chief executive of Royal Bank of Scotland

Royal Bank of Scotland’s chief executive has warned that it could fail to sell its Williams & Glyn unit before the end of this year, leaving the state-backed lender in “uncharted territory”.

Ross McEwan, chief executive of the bank, which is 73 per cent owned by the government, said RBS was “having to think about the ‘what ifs’” in the event that RBS does not sell Williams & Glyn by the end of 2016.

    Mr McEwan said: “We are in uncharted territory if we don’t actually sell the assets through an asset sale this year.”

    RBS said at the end of 2015 that it would begin the formal process of seeking a buyer for Williams & Glyn with a view to striking a “binding agreement to sell the business by year-end 2016”.

    His comments, at a conference on Tuesday hosted by Bank of America Merrill Lynch, come a week after the Financial Times revealed Santander had dropped out of talks to buy Williams & Glyn following a price disagreement. One banker familiar with the talks said at the time that Santander could still come back to the table if the price was right.

    RBS must offload Williams & Glyn as a condition of European Commission rules for receiving a £45bn bailout during the financial crisis. RBS has argued that divesting Williams & Glyn has been a tough and highly complicated process, as the new bank has 2m retail and business customers, with a 300-strong branch network that must be extrapolated from its own systems.

    RBS is in discussions with the Treasury about ways it could meet the commission’s criteria. A person close to the plans said that Clydesdale and Yorkshire Banking Group, a challenger bank, was eyeing the Williams & Glyn branches.

    Mr McEwan confirmed on Tuesday that the bank was looking at “alternative options” alongside the trade sale, but gave no further detail.

    One banker suggested RBS could look at boosting competition in the SME market through other means as a way to potentially meet the commission’s requirements. Mr McEwan pointed out at the conference that the arrangement was between the commission and the UK Treasury, which suggests there might be room for negotiation.

    The bank came under fire for spending about £1.5bn on plans to create Williams & Glyn as a standalone bank to list on the stock exchange, which RBS dropped in August.

    Mr McEwan said the decision was based on the lower-for-longer interest rate environment after the Brexit vote, which would render the cost of running Williams & Glyn as a separate bank untenable.

    Offloading Williams & Glyn is a key issue for shareholders, as RBS management has said in the past that the return of excess capital, potentially through dividends, is dependent on selling off the challenger bank.