Broker pushes plan to split RBS into bad bank

Tim Wallace
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SWISS bank UBS believes RBS’ toxic assets should be split off from the bank to boost value for the taxpayer, according to a leaked report.

The investment bank, which is RBS’ corporate broker, argues the state should take control of the bad bank of legacy assets while other minority shareholders would take one-third of the good business.

The report, leaked to the Sunday Telegraph, estimates this would leave shares in the remaining bank worth around 540p, making a profit for the taxpayer.

UBS also proposes removing the US bank Citizens from RBS, which already plans to start selling off the unit.

And it wants the troubled Ulster Bank to be taken off RBS and put in government hands.

The report argues that its recommendations would leave the remaining, core RBS as a clean, simple lender that could be sold off more easily.

However not all analysts agree, with some fearing a split would be too expensive and time consuming to generate value for the taxpayer.

For example ratings agency Fitch recently estimated the costs of a split would outweigh the benefits, knocking the group’s capital ratio and increasing uncertainty for potential future buyers. It believes a split to be unlikely, as small shareholders would have to vote on the plan and may be sceptical of the potential to add value.

The new assessment comes after RBS decided on Friday to sell half of its so-called Rainbow branches to a consortium of bidders including Corsair and the Church of England.

The European Commission is forcing the bank to sell off 316 branches as part of its 2008 bailout. The new Williams and Glyn’s bank will be built over the coming year or more, before the remaining half is floated on the stock market. The aim is to create a new high street bank to introduce more competition into the market.

The new bank is expected to have its IT systems built by Infosys in a £300m deal over the next year. That will keep it separate from RBS, in contrast to the TSB Bank being spun off from Lloyds, which will share its parent’s systems.