Major asset sales loom for RBS
November 3, 2009
By Jon Menon London
Royal Bank of Scotland Group (RBS) might be forced by the EU to sell more assets than planned, Britain's biggest government-controlled bank said yesterday.
The stock dropped as much as 14 percent.
The agreement with the EU would "include some divestments not initially contemplated", said RBS. "It remains RBS's goal that any required divestments do not threaten its recovery plan."
RBS might have to sell its Churchill, Direct Line and Green Flag insurance operations along with more than 300 bank branches, and shrink its investment banking unit after receiving £20 billion (R260bn) from the government last year, a person familiar with the matter said last week. RBS might also sell its Global Merchant Acquiring card processing unit, the Sunday Telegraph reported, without saying where it got the information.
Jane Coffey, a fund manager at Royal London Asset Management, said: "I wouldn't assume that being a forced seller will get them a really good price. The uncertainty continues and the news continues to get marginally worse."
The EU is forcing banks that took state money to sell assets and branches to ensure they do not have an unfair advantage. Last month it forced ING Groep, the biggest Dutch financial services company, to sell its insurance units to win approval for a bailout. In the UK, Lloyds Banking Group may have to sell asset and branches, while Northern Rock is splitting into two.
RBS, 70 percent government owned, was down 7 percent at 39p at 10.04am in London, valuing the bank at £22.5bn.
Chancellor of the Exchequer Alistair Darling at the weekend said splitting up RBS, Lloyds and Northern Rock would help create three new banks by 2013, boosting competition. Lloyds said last week that forced asset sales "will not have a material impact" on the bank.
"RBS rather than Lloyds is suddenly looking like the sacrificial lamb," said Simon Willis, an analyst at NCB Stockbrokers. EU-enforced disposals "are looking much more severe than expected", he added.
RBS chief executive Stephen Hester dropped plans to sell the bank's insurance units in January after failing to agree a price with potential buyers. - Bloomberg
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