RBS seeks EU consent for smaller Williams & Glyn sale

Bloomberg

Royal Bank of Scotland Group Plc is seeking to sell a smaller chunk of its Williams & Glyn consumer-banking unit after failing to draw any offers for the entire operation, a person with knowledge of the matter said.
The UK government, which own 72 percent of RBS, is seeking European Union approval for the sale of a smaller version of the unit at the bank’s request, according to two people who asked not to be identified because the details are private. Edinburgh-based RBS hasn’t received any bids that comply with its EU mandate to divest all of the business, one of the people said.
The prospect of seeking concessions for RBS comes as Prime Minister Theresa May prepares to trigger Britain’s exit from the EU in a move that will spark at least two years of political wrangling. The bank had already put the government on a collision course with the trading bloc after revealing it would miss an EU deadline to sell Williams & Glyn by the end of 2017.
RBS has drawn interest in the 314-branch consumer unit from firms including Spain’s Banco Santander SA and CYBG Plc, which operates Britain’s Clydesdale and Yorkshire banks. But none are willing to buy six of Williams & Glyn’s NatWest outlets in Scotland, said the person with knowledge of the matter. CYBG has also asked RBS to remove business customers that have more than 25 million pounds ($32 million) in revenue from the disposal because they are tougher to transfer, a separate person added.
CYBG Chief Executive Officer David Duffy said last month his bank would only buy a rival if the “structure, the costs and the perimeter” of the business were “absolutely on our terms.” His bank said Oct. 25 it made a preliminary bid for Williams & Glyn.
RBS rose 2.3 percent to 222.3 pence at 12:25 p.m. in London trading as bank stocks gained following the U.S. Federal Reserve decision to raise interest rates for the first time this year. The company has slumped 26 percent in 2016 as the worst performing major British lender in the period.
The mandate to sell Williams & Glyn was first imposed as a result of RBS’s 45.5 billion-pound bailout at the height of the financial crisis. The lender cannot reinstate dividend payments until it has assured the Bank of England it will meet its EU state-aid requirements, while it must also settle a U.S. probe into the sale of mortgage securities that could cost the bank billions of dollars.
RBS will probably remove some assets from the sale, but look to “as closely as possible fulfill the original intention of the divestment requirement,” analysts at Goldman Sachs Group Inc. led by Nick Baker wrote in a note to clients last month.

‘Uncharted Territory’
RBS has also weighed options including the closure of Williams & Glyn, which would force its customers to move to a different lender in a process known as incentivized migration, according to two people with knowledge of the matter. CEO Ross McEwan previously said the bank would enter “uncharted territory” if he fails to sell the unit by the end of 2016 and that he would weigh “alternative options” to meet EU demands.
“We continue to make progress on reaching a solution with regards to our state-aid obligations,” said Linda Harper, a spokeswoman for RBS.
Any major changes to Williams & Glyn would require UK Treasury officials to win approval from EU antitrust regulators, who told Britain in 2009 that RBS must sell a unit with 5 percent market share in the country among small-and medium-sized enterprises and mid-corporate customers. The disposal must also include 6,000 employees, the six Scottish NatWest branches, 308 RBS branches in England and Wales and 40 business and commercial banking centers.
“We understand they remain fully committed to a divestment,” a spokesman for the European Commission said in an e-mailed statement. The EU is “closely following the divestment process of the business previously described as Williams & Glyn, in good cooperation with the U.K. authorities and RBS.”
RBS has lost about 5 percent market share in SME and mid-corporate banking over the past seven years, McEwan said on a call with analysts in October. Despite that, there is “an obligation here that needs to be fulfilled,” he added. The bank said at the time it had “positive discussions with a number of interested parties concerning a transaction related to substantially all of the business.”