Branson weighs up bid for 316 RBS branches
Taxpayer-backed Royal Bank of Scotland saw its shares come under pressure as investors weighed up the impact of its collapsed £1.65bn branch sale with Santander.
The Spanish bank pulled the plug on the deal, which covered 316 branches and 40 banking centres for small and medium-sized businesses.
RBS shares dipped 1% as broker Investec warned the lender was now likely to settle for terms that are £500m to £1bn worse than those originally agreed with Santander.
Meanwhile, it emerged Sir Richard Branson's Virgin Money is weighing up a bid for the network of branches.
Sir Richard is reportedly facing a battle with US private equity group JC Flowers - run by billionaire entrepreneur Christopher Flowers - over the EU-enforced disposal.
RBS chief executive Stephen Hester is understood to be confident that he can secure an extension to the Brussels state aid deadline to sell the branches by the end of 2013.
Investec analyst Ian Gordon said: "The original terms agreed appeared generous at the time, and even more so in the light of loss-making Lloyds Banking Group's recent 'giveaway' of its mandated 632 branch disposal to the loss-making Co-op".
The Spanish lender agreed in August 2010 to buy the assets but it pulled out as it became apparent a revised target for the purchase to be completed by the end of the year would not be achieved.
The deadline had already been put back twice and it seemed it would be mid 2014 before the deal was completed.
Buying the RBS division would more than quadruple Virgin's branch network and add a small and medium-sized business bank to its offering.
Credit Suisse analyst Carla Antunes-Silva said Santander's move creates additional uncertainty for RBS and the prospect of "more value destructive alternatives". She added: "There has been significant costs in carving out the branches which will not be recouped."