RBS may have to beef up challenger for market

rising to the challenge: RBS has to sell off Williams & Glyn as a condition of having received state aid during the financial crisis. 'Picture: Stefan Rousseau/PA Wire
rising to the challenge: RBS has to sell off Williams & Glyn as a condition of having received state aid during the financial crisis. 'Picture: Stefan Rousseau/PA Wire
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ROYAL Bank of Scotland could be asked to beef up the size of the Williams & Glyn business it plans to sell next year, to ensure it poses a stronger challenge to the big players in the banking sector.

RBS must sell Williams & Glyn, which consists of 307 branches, as a condition of having received state aid during the 2007-09 financial crisis.

RBS is resurrecting the Williams & Glyn brand, which had a strong presence in the North of England, nearly 30 years after it disappeared from the high street.

The Treasury yesterday revealed that it has asked the Competition and Markets Authority (CMA) to assess what impact the sale would have on the British banking market.

The CMA has no powers to order changes, but the Treasury could ask RBS – which is 80 per cent owned by the government – to add more branches or make other changes to make Williams & Glyn a stronger “challenger” bank, industry sources said yesterday.

The Government wants Williams & Glyn to increase competition, especially for small and medium sized (SME) business lending. There have been long-standing concerns that the market for small business lending has been dominated by the major banks. Many analysts believe that extra competition would mean a better deal for Britain’s smaller firms.

Williams & Glyn will be a separately licensed bank with about 1.4 million retail customers and more than 200,00 SME customers.

The CMA is already investigating competition in UK banking, but the review into Williams & Glyn will be separate and the findings will be reported by July.

The Treasury said the Prudential Regulation Authority would separately assess whether the bank has a viable and sustainable business model.

In its statement, the Treasury said: “The divestment of Williams & Glyn represents an opportunity to improve competition in the small business banking sector, and today’s announcement is another step in the Government’s long-term plan to improve competition in banking, and create a banking sector that gives real choice to retail and small business customers and supports the wider economy.”

Williams & Glyn must be sold by the end of 2017. The sale process has been costly and dogged by setbacks, largely related to technology problems. In 2013 RBS sold a 49 per cent stake to a consortium of investors, led by US private equity firm Corsair. RBS last month named Jim Brown as chief executive of the business.

“We are working hard and devoting significant resources to establishing Williams & Glyn as a viable, standalone bank that will bring increased competition to the retail market. We continue to focus on achieving the best possible outcome for customers, with an IPO (initial public offering) planned for Q4 (the fourth quarter) of 2016,” an RBS spokeswoman said.

A CMA spokesman said yesterday: “We have today received a request from the Chancellor to advise on the implications for competition of the latest proposals for divestment by RBS of Williams & Glyn as a new UK retail bank.”

A focus on small businesses

Williams & Glyn will have a particular focus on small business banking – a sector seen as vital to the UK’s recovery.

It is expected to have a five per cent market share of the small and medium-sized enterprise (SME) and mid-corporate banking markets and a two per cent share of UK personal current accounts.

The Church Commissioners and financial firms Corsair Capital and Centerbridge Capital are part of a consortium of investors in the Williams & Glyn business, which is being lined up for a market float next year.

RBS recently announced the appointment of Jim Brown as chief executive of Williams & Glyn.