RBS hires bank to run float of 316 branches

Tim Wallace
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SWISS bank UBS will organise the formation of 316 RBS branches into a new high street bank, after the sale of the branches to Santander fell through last month.

The European Commission is forcing RBS to sell off the branches – which come with 1.8m customers and close to 250,000 business accounts – by the end of 2013 as part of the bank’s 2008 bailout.

UBS organised much of the original deal, in which the branches and customers were selected and negotiations started with Santander.

But after a series of delays Santander pulled out of the deal last month, leaving the bank with just over a year to find another buyer, float the branches in an initial public offering (IPO) or to get more time from the EC.

RBS has now appointed UBS to run a so-called dual track process, preparing for both a sale and an IPO, before selecting the option with the best sale price and dropping the other set up. Nationwide Building Society and US private equity firms JC Flowers are frontrunners to buy the branches.

Virgin Money has been approached by RBS and is known to be welcome to expansion opportunities though Sir Richard Branson has since dampened expectations of a purchase in this case.

“It’s not something Virgin Money needs to do,” Sir Richard told City A.M. last month. “My feeling at the moment is that organic expansion makes the most sense.”

But RBS needs to show any buyer it is serious about running an IPO, to avoid a buyer thinking it is the only option and so driving down the sale price. Santander had arranged a price of £1.65bn, but analysts now believe RBS will get between £500m and £1bn for the units.