Branch sale collapse: The RBS board had received notice that Santander UK is pulling out of its agreed purchase of certain UK branch-based businesses. The business includes 316 branches, broadly comprising the RBS branch business in England and Wales, and the NatWest branch business in Scotland, along with certain SME (small and medium enterprise) and corporate activities across the UK.
The sale of the branches (business) was mandated by the European Commission in 2009 as a condition of its approval of state aid provided to RBS as part of the recapitalisation by the UK Government. Santander's decision follows extensive work by both parties to separate the business into a largely standalone form and to prepare the business, customers and staff for transfer. The business to be sold generated first half 2012 operating profit of £186 million or 3% of core RBS Group income during the period.
In all, the news does represent a setback for RBS. Uncertainty over whether a sale can be achieved within the European Commission’s deadline has been raised, whilst a still challenging economic backdrop raises the prospect that any new buyer will look to negotiate down the price paid for the business compared to that originally agreed by Santander. More positively, much of the hard work in separating the business has been done, the European Commission’s deadline could be extended whilst new potential buyers already appear to have emerged.
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