As I See It
EU should call time on this RBS branch sale
Santander has pulled out of the deal. Not for the first time. It also withdrew from talks in 2012, on that occasion over IT issues. At least, that is what it told us at the time.
Since then RBS has spent £1.4 billion on its IT system, mainly on splitting off the branches and creating a new bank under the Williams & Glyn brand which it intended to float on the stock market.
There is something just not right about all this. Other banks have been sold, dismantled and restructured without it taking eight years. And even after all this time the bank’s CEO Ross McEwan earlier this year admitted defeat in resolving the IT issues.
Now the problem appears to be the price. Santander is balking at the £1.6 billion-plus being asked for the 315 branches of NatWest, almost all of them in England.
It should come as no surprise that the Spaniards are having second thoughts. Technology is moving apace and branches are to banking what telephone boxes are to BT and banks can’t seem to close them fast enough.
Age-old commitments to be the ‘last branch in town’ have been ditched as consumers do more of their day-to-day banking online. Why would any bank want to buy branches at this time?
However, Santander wasn’t so much interested in the high street consumer as the business customers that it is trying to bulk up. To that extent, it would have been surprising if Stander had kept all 315 outlets open.
RBS has been working on a twin-track strategy, carving out the branches around a standalone bank under the Williams & Glyn banner, while talking to potential buyers. Until now Santander has been the only interested buyers. A new buyer is possible with Clydesdale and Yorkshire in the frame, but this will only delay the sale even longer.
On its own W&G would have ranked as the UK’s seventh largest bank with a 2% share of the personal current account market. But it’s the 5% of the SME market, amounting to 113,000 commercial customers, which was the real prize.
Chances are that with its options running out, RBS will be forced to succumb to a bit of horse trading and will lower the price. Santander will get the lot in a cut-price deal and no one should be surprised if, in due course, a fair number of those 315 branches are sold to coffee and pub outlets.
Santander UK, however, also has issues of its own to resolve. It’s long-held plan to float remains on hold and while additional SME business might help its strategy it might also decide that this is a deal too far.
If that is that is the case then it must be time for the EU to lift its enforced action on RBS. Selling the branches was never so much a ‘condition’ of receiving state aid in 2008 as a ‘penalty’ for getting itself in a mess in the first place.
Part of the resolution to the banking crisis was to create more competition and that meant carving out branches from Lloyds and RBS.
While Lloyds managed to divest TSB, RBS has got itself in a tangle, employing thousands of staff and absorbing capital that could have been more usefully employed in rebuilding the balance sheet and improving customer service.
Like the enormous penalties being meted out in the US the EU order is no seen as overly punitive. Analysts believe continuing action against the banks is serving no useful purpose In fact it is making matters worse.
It is time to get over the banking crisis. It sucked and a lot of people got hurt. But that’s what happens at all levels of business. Sometimes it just doesn’t work. But that’s not a good reason to keep beating them up.