RBS initiates talks with Virgin Money over branches

| October 17, 2012
RBS initiates talks with Virgin Money over branches

Royal Bank of Scotland (RBS) is seeking a new buyer for 316 branches after a deal with Santander fell through, and is believed to have approached Virgin Money.

RBS is required the sell the branches under the EU conditions attached to the £45 billion bailout it received from the government when it came to the brink of collapse during the 2008 financial crisis.

Santander agreed to purchase the branches in August 2010 but withdrew its offer last week because the sale process was taking too long.

It had been expected to pay £1.65 billion for the branches.

According to the BBC, Virgin is “very interested” in coming to a deal, which would quadruple the size of its UK banking operation.

Virgin Money’s original bid for the branches two years ago was rejected in favour of the deal with Santander.

RBS chief executive Stephen Hester said: “It is of course disappointing that Santander decided to pull out of this transaction, especially for the customers and staff involved.

“However, RBS’s strong progress in our restructuring plans means we can continue to provide a stable home for this business and its customers pending a further resolution.”

RBS may now have to approach the European Commission to seek an extension to the December 2013 deadline for the transfer of the branches.

There is concern that Virgin Money could now try to buy the branches for substantially less than it offered in 2010, at the expense of UK taxpayers.

RBS is 83 per cent owned by the taxpayer following the government bailout.

In a separate move to free itself from state control, RBS has withdrawn from the Government’s Asset Protection Scheme which insured its riskiest loans, as the protection is no longer needed.

The move will save RBS £125 million a quarter in fees.

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