Santander Scraps 1.7 Billion-Pound RBS Branch Deal
LONDON -- The shares of Royal Bank of Scotland (ISE: RBS.L) (NYS: RBS) fell 3 pence to 268 pence in early London trading this morning after the bank confirmed Spanish rival Santander (ISE: BNC.L) (NYS: SAN) had scrapped a deal to buy 316 RBS branches.
Santander claimed today that the transaction was originally scheduled to complete by late 2011, and earlier this year had agreed to extend the completion deadline to the end of 2012.
However, the Spanish bank disclosed today that, "it is now apparent that this revised target will not be achieved" and that it was "not willing to agree a further extension to that deadline."
A preliminary agreement between the two banks was first signed in August 2010. Santander had agreed originally to pay about 300 million pounds above the book value of the branches, thereby pricing the deal at 1.7 billion pounds.
Santander's London-traded shares gained 4 pence to 460 pence this morning.
Santander U.K.'s chief executive, Ana Botin, said:
Our guiding principle throughout this transaction has been a seamless journey for customers, which requires the business to be delivered to Santander UK by RBS in a steady state. We have concluded that given delays it is not possible to complete this within a reasonable timeframe.
Stephen Hester, chief executive of RBS, 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.
The deal had involved 311 RBS-branded outlets in England and Wales, five NatWest-branded branches in Scotland, a total of 1.8 million customers, and 21.7 billion pounds of deposits.
The intended sale was to satisfy conditions laid down by the European Commission in return for RBS's 45 billion pounds taxpayer bailout in 2009. The flotation of Direct Line was prompted by the same EC mandate.
Today's news from RBS suggests the FTSE 100 (UKX) member still has its difficulties. Indeed, the wider banking industry still faces plenty of issues, not least EU reforms, boardroom bonuses, and political/regulatory interference.
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Maynard does not own any share mentioned in this article.
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