The Royal Bank of Scotland (RBS) has ditched its plans to spin off Williams & Glyn as a standalone bank and will instead sell the division directly to one of its rivals
The government-owned lender, which reported a £2bn loss for the first half of the year, blamed IT difficulties for the hold-up, saying it was proving too challenging to create a completely standalone technology system for Williams & Glyn.
However, the result of the referendum and the prospect of significantly lower interest rates has also raised questions about how viable Williams & Glyn would be as an independent operation.
Given the outlook, the RBS board "concluded the risks and costs inherent in the programme are such that it would not be prudent to continue" down the IPO route, the bank's interim report stated today.
RBS was ordered to sell Williams & Glyn by the end of next year as part of the terms of its government bailout. Earlier this year it raised fears that the timetable could not be stuck to.
Since then, RBS confirmed it has begun "positive discussions with a number of interested parties concerning an alternative transaction", which would involve Williams and Glyn being snapped up by another big banking name. Santander has reportedly made an offer for the 300-branch network which has 1.8m customers and around £24bn in deposits.
Without naming "interested parties" RBS said today: "These discussions are at a preliminary stage and may or may not lead to a viable transaction." The bank hopes by selling directly to a rival it will be able to meet the December 2017 deadline.