RBS Says Santander Drops 1.7 Billion-Pound Purchase
Royal Bank Of Scotland Group Plc (RBS) Chairman Philip Hampton suggested Banco Santander SA (SAN)’s scrapping of a 1.7 billion pound ($2.7 billion) purchase of some of its branches stemmed from a waning appetite for expanding in the U.K.
Hampton said technical problems cited by the Madrid-based lender could have been overcome. Instead, he suggested Santander’s interest in expanding in the U.K. may have diminished since the deal to buy 316 branches was agreed two years ago. The move would have run counter to Santander’s decision to raise capital in Latin American (BRLA) markets.
“People have speculated that it’s not an easy time in general for banks to take on a lot of risk-weighted assets,” Hampton told reporters in Tokyo today, where he has been holding meetings on the sidelines of the International Monetary Fund’s annual gathering. “IT challenges always get overcome.”
Santander’s decision to abandon the purchase coincides with increasing regulatory pressure on Spanish banks to bolster capital amid mounting real estate losses at home and pain from the three-year-old euro-area sovereign debt crisis.
Santander had agreed in 2010 to pay 350 million pounds more than the branches’ net asset value when the deal was scheduled to be completed, Edinburgh-based RBS said at the time. That valued the business at about 1.7 billion pounds. The companies originally sought to finish the transaction by the end of 2011. That was later extended to 2012’s fourth quarter, it said.
Since then, Santander, Spain’s biggest bank, has sought ways to boost capital. The bank carried out an offering of as much as $4.09 billion in shares of its Mexican unit Grupo Financiero (BSMX) Santander Mexico SAB last month. Chairman Emilio Botin has said that the firm plans to list its biggest units within the next five years.
Santander U.K. Chief Executive Officer Ana Botin said in a statement yesterday she had decided to call off the deal given delays in RBS preparing its systems for the handover. The acquisition would have allowed Santander to make out loans to small and mid-sized businesses, adding to its residential mortgage business.
Hampton today acknowledged that businesses lending for such companies had become less attractive recently.
Branches for sale include RBS branded locations in England and Wales, and NatWest Bank branches in Scotland. The unit had a 186 million-pound operating profit in this year’s first half and holds 21.7 billion pounds in customer deposits, RBS said. European Union competition authorities had ordered the sale as part of the state-bailout of the lender in 2008.
“We had only one serious bidder” Hampton said referring to Santander. “Others took a look and decided it wasn’t for them.”
Still, Hampton suggested today that RBS may get some leeway from EU authorities when it comes to finding a new buyer for the branches, which it was required to do by 2014. Hampton said that the EU Commission has “extended one or two deadlines in other cases.”
Hampton also left open the possibility that RBS may try and hold onto the branches, saying the climate of state aid is now “a lot more flexible” than at the onset of the crisis. It would be down to the British government to negotiate more lenient terms with Brussels.
“The Commission has been much, much more flexible,” he said. “It used to be a pretty severe regime but they are making different judgments,” said Hampton “As it happens, the UK retail banking market is more competitive now than it has been for decades.
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