Royal Bank of Scotland confirmed today that it will no longer be required to sell the 307 branches that make up its Williams & Glyn network, after the Treasury stepped in to seek changes to its State Aid obligations.
Shares in the lender were up by more than five per cent at the open, and were up 6.9 per cent by mid-afternoon.
The bank was supposed to sell Williams & Glyn by the end of this year in order to meet EU State Aid requirements set after RBS received a £45bn bailout in 2008.
Santander and Clydesdale were among the bidders for Williams & Glyn, but no deals transpired. RBS said today that "none of the proposals to acquire the business received by RBS can deliver a full separation and divestment before the 31 December 2017 deadline".
The new plan envisages that RBS will deliver the following revised package of remedies, worth £750m, to promote competition in the market for banking services to small and medium enterprises:
- A fund, administered by an independent body, that eligible challenger banks can access to increase their business banking capabilities;
- Funding for eligible challenger banks to help them incentivise small and medium-sized firms to switch their accounts from RBS, paid in the form of "dowries" to eligible challenger banks;
- RBS granting business customers of eligible challenger banks access to its branch network for cash and cheque handling, to support the measures above; and
- An independent fund to invest in fintech to support the business banking of the future
The possibility of this new plan was reported over the weekend, and confirmed this morning.
"Today's proposal would provide a path to increased competition in the SME market place," said RBS boss Ross McEwan.
"If agreed it would deliver an outcome on our EC State Aid divestment obligations more quickly and with more certainty than undertaking a difficult and complex sale and would provide much-needed certainty for customers and staff."
Shore Capital analyst Gary Greenwood said removing the uncertainty around meeting the state aid obligations "seems like good news for RBS investors".
"Executing a disposal of Williams & Glyn was a key hurdle that the group needed to overcome before it could recommence paying dividends," Greenwood added.
"In addition, the group will get to retain the ongoing earnings generation of Williams & Glyn’s branch network and customers, to the extent that these are not lost as a result of the new package of measures designed to boost competition.
"The flip side is that the group will no longer benefit from any proceeds or capital relief associated with a disposal and will also need to spend additional money (perhaps another few hundred million pounds on top of the c£1.6bn already spent trying to execute the separation) to re-absorb Williams & Glyn back into the group."