RBS Equity Derivatives Unit Said to Draw Rivals’ Interest
Royal Bank of Scotland Group Plc, the British lender scaling back its investment bank after being bailed out, has drawn interest in its structured retail products and equity derivatives business from rivals, said people with knowledge of the matter.
BNP Paribas SA (BNP), Commerzbank AG (CBK) and Societe Generale SA (GLE) are considering bids for some or all of the business, said the people, who asked not to be identified because the process is private. Credit Suisse Group AG (CSGN) and JPMorgan Chase & Co. (JPM) may also look at parts of it, two of the people said. Derivatives are a type of security whose price is dependent upon or derived from underlying assets such as stocks, bonds, commodities and currencies.
RBS, Britain’s biggest government-owned lender, announced last month that it planned to exit all structured retail investor products and equity derivatives. Under Stephen Hester, who stepped down as chief executive officer last month, RBS has cut its balance sheet by about 900 billion pounds ($1.4 trillion) and shed more than 36,000 jobs to bolster capital and prepare for the eventual sale of the stake the government took when it bailed out the Edinburgh-based lender in 2008 and 2009.
RBS said it had earned 340 million pounds in the first quarter, compared to 333 million pounds in the previous period, from its rates and investor products business, which includes equity derivatives.
The stock rose as much as 2 percent and was up 1.1 percent at 273 pence as of 8:02 a.m. in London trading today.
With the sale, RBS becomes the third European bank to close its structured products business for retail investors since March, citing high capital costs and expenses for the securities. The bank has about 50,000 structured products outstanding such as certificates tied to commodities, currencies, equities, interest rates and proprietary indexes, according to its website.
Competitors may be interested in buying parts of the RBS business because it provides “an opportunity to increase market share,” said Cormac Leech, a banking analyst at Liberum Capital Ltd. in London.
Spokesmen for RBS, Commerzbank, BNP Paribas, JPMorgan, Credit Suisse and Societe Generale declined to comment.
Regulators in the U.S. and Europe are seeking to increase transparency for structured products after they came under scrutiny following the 2008 financial crisis for being opaque and overly complex. Rules requiring banks in the European Union to provide concise information outlining the characteristics and risks of the products they sell may be in place by the end of 2014, according to the European Commission.