- Bank continues to prepare for IPO of consumer unit next year
- EU rules say RBS must exit unit by year-end 2017 after bailout
Royal Bank of Scotland Group Plc has been approached by bidders for Williams & Glyn and is weighing the option of selling the consumer business instead of holding an initial public offering next year, according to two people with knowledge of the plans.
British and European banks have signaled interest in the unit that could be valued at about 1.5 billion pounds ($2.3 billion), said one of the people, who asked not to be identified because the deal is private. RBS, which previously said it plans to start Williams & Glyn next year, is continuing to prepare for an IPO in the fourth quarter while considering any offers, the people said.
Britain’s biggest government-owned lender must spin-off the consumer unit, which has about 300 branches in the country and is led by Chief Executive Officer Jim Brown, by the end of 2017 to meet European Union state-aid rules related to its 45.5 billion-pound bailout at the height of the financial crisis. A sale of Williams & Glyn would follow the March disposal of TSB Banking Group Plc, a former Lloyds Banking Group Plc unit, to Spain’s Banco de Sabadell SA for 1.7 billion pounds.
“We are working hard and devoting significant resources to establishing Williams & Glyn as a strong challenger bank that will bring increased competition to the market,” the bank said in an e-mailed statement, declining to comment on any outside interest. “We continue to focus on achieving the best possible outcome for customers and shareholders.”
RBS closed at 282.60 pence in London, down 1 percent. The stock has dropped about 28 percent this year, making it the second-worst performer among Britain’s five largest lenders. Lloyds, which also received government aid during the global financial crisis, is down 9 percent.
RBS has about 5,000 people working on the spinoff of Williams & Glyn, which employs some 4,500 employees, said one of the people. A standalone IT system is being developed for the commercial and retail lender so RBS will avoid having to make a payment to an acquirer to help fund the separation of its computer systems to another bank. TSB was entitled to receive a 450 million-pound payment from Lloyds for this reason.
RBS led by CEO Ross McEwan submitted a 16,000-page business plan to U.K. regulators on Oct. 1 to support its application for a banking license for the unit. Bank of America Corp. is advising the Edinburgh-based lender on the IPO, one of the people said.
Williams & Glyn, which is focused on consumer banking and commercial lending to small businesses, had assets of 20.1 billion pounds at the end of September, according to RBS’s third-quarter earnings statement. Customer deposits totaled 23.6 billion pounds.
RBS raised 600 million pounds of pre-IPO investment in 2013 from a group headed by private-equity firms Corsair Capital LLC and Centerbridge Partners LP, agreeing to hand over as much as 49 percent of the bank upon its listing. RIT Capital Partners Plc and Church Commissioners for England are among investors in the consortium.
The lender had previously planned to sell the unit, which is codenamed “Project Rainbow”, to Banco Santander SA, in a deal which collapsed in Oct. 2012 with the Spanish bank citing completion delays.