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Santander quits talks with RBS on Williams & Glyn sale

Published 21/09/2016

RBS has to offload the Williams & Glyn network to appease EU rules on state aid
RBS has to offload the Williams & Glyn network to appease EU rules on state aid

Taxpayer-backed Royal Bank of Scotland has suffered a fresh blow as experts said it will be forced to slash the price for its Williams & Glyn branches after Santander pulled out of talks.

It is thought other suitors may be interested in buying the branches the group has to offload to appease EU rules on state aid, but RBS is expected to fetch less than the £1.9 billion it wants for the business.

Santander walked away from a deal to buy Williams & Glyn late on Tuesday after failing to agree on price - the second time it has ditched talks with RBS.

Analysts have speculated CYBG - the owner of Clydesdale and Yorkshire banks - may be interested in buying the 300-strong Williams & Glyn network.

Santander has also reportedly left the door open to return to the negotiating table for the right price.

But analysts said RBS faces the prospect of making losses on the Williams & Glyn sale in a "long and painful" saga.

Neil Wilson, markets analyst at ETX Capital, said it is "fresh humiliation" for RBS.

He said: "Santander might just be playing hard ball and wants to remark these assets.

"Brexit has undoubtedly played a part. With all sorts of questions about the state of UK financial services hanging in the air in the wake of the referendum, it's hard to really say what Williams & Glyn is worth.

"Whoever buys it, it's likely to be for less than the £1.9 billion RBS wants."

RBS has already spent more than £1.3 billion trying to offload the Williams & Glyn network, having at one stage planned to spin it off as a standalone bank.

Ian Gordon, banking expert at Investec, said: "RBS is in a weak negotiating position with a forced disposal deadline of the end of 2017."

He said there is hope of a deal with a trade buyer, adding that CYBG is a strong possible suitor, but he raised concerns that the price would sink below the costs already spent on Williams & Glyn.

"It's a long and painful story that doesn't have a light at the end of the tunnel," he added.

Shares in RBS were down more than 1% on Wednesday.

Santander had reportedly put forward a formal offer last month.

Its latest move to pull out of talks comes after it abandoned a £1.65 billion deal to buy Williams & Glyn in 2012 due to the complications of separating out the IT systems.

RBS had since hoped to list Williams & Glyn separately on the stock exchange, but last month said it was scrapping these plans as even lower interest rates would make trading tougher for a small-scale challenger bank.

RBS has to offload the branches by the end of next year as a condition of its £45 billion bailout at the height of the financial crisis.

The group is still 73% owned by the Government.

The Treasury said despite the Brexit vote to quit the EU, the UK is still a member of the EU and would be expected to "fulfil its obligations".

Santander, RBS and CYBG declined to comment.

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