RBS receives £1bn offer for Williams & Glyn's

The Royal Bank of Scotland has been approached by 17 of the biggest investment institutions, looking to buy 315 of the bank's branches for £1bn.

by Michael Northcott
Last Updated: 19 Aug 2013

The offer would mean RBS offloading around two million customers – mainly from branches originally named under Williams & Glyn’s – to the investors, who would be hoping to create a brand new small player in the retail banking market. 

The bank has had to consider ways of getting rid of the branches anyway, under EU rules governing state bailouts of banks, and this looks to be the best offer the bank has come across so far. Whether or not these investors, which include Schroders, Invesco Perpetual and Foreign & Colonial, will get their way remains to be seen. 

And as if RBS’ chief executive didn’t have enough on his plate already, the governor of the Bank of England has revealed that he thinks there is an argument for splitting up the Royal Bank of Scotland in the wake of poor financial results.

Speaking to the parliamentary Banking Standards Commission, King said there exists within RBS a ‘good bank’ and a ‘bad bank’, and said that he thinks the arguments for dividing that bank up are ‘powerful ones’.

He said: ‘The whole idea of a bank being 82% owned by the taxpayer, run at arms' length from the government, is a nonsense. It cannot make any sense. I think it would be much better to accept that it should have been a temporary period of ownership only, to restructure the bank and put it back. The longer this has gone on the more difficult that's become [to return RBS to the private sector].’

King also explained that the government and the public needed to ‘accept’ that the bank may now be worth less in the private market than originally thought, and history has ‘dragged on’ for too long as far as the debate about restoring it to profitability is concerned.

Nonetheless, chief executive of the bank, Stephen Hester said just last week that he reckons the bank could be sold within two years, as he thinks its restoration is on the right track. That is, of course, if the bank doesn’t have to shoulder another few billion pounds in fines. In its financial results, released this week, it showed a £5.2bn loss for 2012, a massive collapse on its modest profit the year before. 

In his comments to the commission, King also shed some light on the murky goings-on between the financial sector and the government in the run up to, and even since, the financial crash. He said: ‘I was surprised at the degree of access of bank executives to people at the very top: it was certainly easier access [to them] than the regulators had.

‘[Before the financial crash, the FSA] knew that if they were tough on a bank, the chief executive could go straight to Number 10.’ Whether or not this is endemic through the sector or limited to just a couple of banks is unclear, but it certainly renders the protestations of governments that they ‘had no idea’ of the excesses of banking open to debate…

The Bank has just announced that there will be no more quantitative easing and that interest rates will stay at 0.5%. Meanwhile, the EU has gone ahead with its plans to cap bankers’ bonuses at 100% of yearly salary, despite chancellor George Osborne’s bleatings to the contrary. It’s not good news: as much as people enjoy banker-bashing these days, UK plc desperately needs the financial sector’s tax revenues to stay plentiful. This could now be a hole in the boat…

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today