Treasury confirms RBS and Lloyds sell-offs

| November 3, 2009
”Treasury

A major overhaul of the UK banking industry has been confirmed by the Treasury today with plans for Royal Bank of Scotland (RBS) and Lloyds Banking Group to sell off bank branches.

The shake-up comes as the Government hopes to create more competition within the industry.

The Government holds a 70% stake in RBS and a 43% stake in Lloyds after last autumn’s bailouts and the two banks have agreed to sell parts of their businesses in order to limit their reliance on Government support.

RBS will sell 318 branches, while Lloyds has agreed to sell 600 of its retail branches with disposals including Lloyds TSB Scotland and mortgage broker, Cheltenham & Gloucester, as well as the Intelligent Finance online business.

Furthermore, it has been confirmed that Lloyds will embark on a £13.5 billion rights issue, as well as a £7.5 billion debt swap.

The rights issue means Lloyds will avoid the Government’s Asset Protection Scheme (APS).

Lloyds has been attempting to avoid participation in the scheme, which insures against losses arising from toxic assets, but it will have to pay the Government a fee of £2.5 billion as a result.

Meanwhile, the Treasury said RBS has confirmed it will participate in the scheme on revised terms. It will have £282 billion of its assets insured by the taxpayer, less than the £325 billion proposed earlier this year.

“The likely costs to the taxpayer and the risks on the impact on the public finances have been reduced,” the Treasury said.

Consequently, the Government’s stake in RBS will increase to 84%, however, the Treasury said its ordinary shareholding will not exceed 75%.

In related news, RBS announced yesterday it is to eliminate 3,700 positions among its branch staff.

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