Friday witnessed the fall of one of the most promising bids with Royal Bank of Scotland’s proposed £1.7 billion sale of 316 bank branches to Santander, leaving RBS with just over a year to dispose off the high street network.
The RBS Santander deal, which Santander had agreed to buy from the RBS more than two years ago, fell apart as Santander stated technical problems that caused long delay in the process of takeover of the RBS branch business.
RBS was expected to complete the transfer of the branches to Spanish lender Santander next year, but will now have start from scratch with the sale process to find a new bidder, or opt for floating division on the stock market.
European authorities had ordered for the sale of the branches as a condition of RBS’s £45 billion taxpayer bail-out in October 2008, that saved RBS from collapse at the height of the financial crisis. With the RBS Santander deal falling through, RBS may ask for an extension of the deadline or may opt to keep the branches.
The collapse of the RBS Satander deal is a major blow to RBS as it punctures its recovery plan. But, Richard Branson’s Virgin Money has emerged as a possible alternative bidder, to RBS’s relief, which is staring at a 2013 deadline. But, RBS is likely to lower the current bid price which is £1.65 billion. Christopher Flowers, the US private equity entrepreneur, has also expressed interest in the bid, keen to expand its small regional lender One Savings Bank.
Santander’s retreat will save RBS some capital and avoid a big increase in its British loan book and exposure during these times when its domestic market is crippling, and severe scrutiny of RBS’ capital and funding is taking place. Shares of RBS shares closed on Friday at 270.9 pence, which means that the UK taxpayers are currently staring at a loss of £21 billion.