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There's still interest, says RBS as Zurich withdraws from auction
THE Royal Bank of Scotland (RBS) insists there is "definitely still interest" in its insurance arm, despite the withdrawal of Zurich Financial Services from the auction.
Analysts said the bank may have to accept a significantly reduced price for the division after Zurich's decision to walk away left just two remaining potential suitors.
RBS is also looking to sell the Australian and New Zealand operations of ABN Amro, the Dutch bank it bought last year. National Australia Bank (NAB), which owns Yorkshire Bank and Clydesdale Bank, is in talks with RBS about buying the ABN Amro's investment and corporate banking units, which are believed to be worth around A$800 million, or 390m. RBS's attempted disposal of its insurance arm and the ABN Amro Australian and New Zealand assets follows its completion of the biggest rights issue in UK history – the 12bn fundraising completed last month.
The remaining bidders for RBS's insurance brands, which include Direct Line, Churchill, Privilege and Green Flag, are believed to be Germany's Allianz and Allstate of the US. Direct Line, Privilege and the motor business Green Flag have a strong insurance presence in Yorkshire and employ more than 3,000 people in Leeds, Sheffield, Doncaster and Pudsey.
Zurich instead said it has agreed to pay 900 million euros, or 720m, for half of the insurance and pension operations of Spanish bank Banco Sabadell SA.
RBS, which owns NatWest bank, said there is "definitely still interest" in the insurance arm from a "number of interested parties", but declined to comment further.
However, speculation is growing that Zurich's withdrawal will drive down the price. Sandy Chen, banking analyst at Panmure Gordon stockbrokers, estimated the insurance business could now fetch around 5bn to 5.5bn, far short of RBS's 7bn to 7.5bn estimated asking price.
RBS is hoping to secure 4bn from offloading non-core assets, but Mr Chen said the insurance arm sale may only achieve 1.5bn to 2bn in capital gains.
He said: "A shortfall in gains would explain the talks between RBS and NAB about a potential disposal of ABN's Australia business.
"In general, we view the disposal of profitable operating businesses in order to address the capital strains from an overpriced acquisition is a recipe for value destruction."
RBS remained tight-lipped on the sale of ABN Australia and New Zealand, saying only that it is "proceeding with examining options under our review process and will advise the market of the outcome once complete".
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Friday 25 May 2012
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