WITH 10 weeks left to meet a European deadline to sell off part of its banking empire, Royal Bank of Scotland Group has been thrown a lifeline by one of its smaller rivals.
Clydesdale Bank, which was floated on the London Stock Exchange earlier this year by National Australia Bank (NAB), confirmed yesterday that it had made an offer for 314 branches of RBS’s Williams and Glyn (W&G) offshoot.
NAB still has a controlling stake in Clydesdale and Yorkshire Bank, and the pair trade as Clydesdale and Yorkshire Banking Group (CYBG). Since its flotation in February Clydesdale shares have risen more than 40 per cent, valuing it at almost £2.4bn.
In a statement, CYBG said its successful demerger had created an independent competitor in the UK banking market, which recently set out a strategy for medium-term growth.
“Whilst the board of CYBG recognises it has a duty to continually evaluate all potential opportunities to enhance its business, it will only evaluate combinations that are in line with the company’s strategic objectives,” it said. “The board of CYBG can confirm that the company has engaged in discussions with RBS and has made a preliminary non-binding proposal to RBS in relation to its Williams and Glyn operations.
“This engagement is ongoing and there can be no certainty that any transaction will occur, nor as to the terms on which any transaction might be concluded.
“A transaction will only be pursued if it is determined by the board to be in the best interests of CYBG shareholders.”
RBS was ordered to sell off W&G by the EU as a condition of its £45bn Government bail-out in 2008, but the potential sale has been fraught with difficulties.
Santander had been a frontrunner to buy it, but an acceptable price could not be agreed and the Spanish bank pulled out last month. It is not known if it will re-enter a bidding war with CYBG.
Some analysts had valued W&G at around £1.3bn and, although the detail of CYBG’s offer is not known, it is likely to be below that valuation.
An RBS spokesman said the bank would not comment on the offer.
Divesting more than 300 branches has been one of the biggest problems RBS has faced since the bail-out. It had intended to float W&G – a dormant brand from the 1970s – as an independent business, but the sale, which has cost £1.5bn to date, has seen persistent difficulties surrounding the creation of a new IT system.
In a stock market announcement in April, RBS said the sale would have a “significantly greater” impact on the group’s finances than originally thought and RBS was unlikely to meet the EU deadline at the end of 2017.
Chief executive Ross McEwan warned last month that RBS would enter “uncharted territory” if he failed to find a solution to the sale. And he is likely to face further questions about it on Friday when RBS reports its third-quarter results, which are expected to add the £52bn of losses incurred since its taxpayer rescue.
Analysts have suggested it faces a loss of £231m for the third quarter, against profits of £952m a year ago.
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