Church to take stake as bank sells branches

Church Commissioners and financial firms Corsair Capital and Centerbridge Capital are joining forces with investment trust RIT Capital Partners to revive the dormant Williams & Glyn’s brand.

RBS, which is 80 per cent state-owned following its near-collapse during the financial crisis, has been forced to sell the branches under European rules on state aid.

The new business will operate “to the highest ethical standards”, according to the Church Commissioners.

The Williams & Glyn’s business, which was subsumed into RBS in the 1980s, will return to the high street as a “challenger bank” to the major players, with a particular focus on small business banking.

It will take over 308 RBS branches and six NatWest branches in Scotland, serving nearly 1.7 million customers, including personal account holders and small-to-medium businesses. The business will take on a £19.7bn loan book and £22.2bn in customer deposits.

The deal involves RBS issuing a bond to the investors ahead of a stock market flotation which will take place at a later date. This will convert to cash and minority share stake worth a total of £600m at the time of the share sale.

John Maltby, former head of commercial banking at Lloyds, will be chief executive of the bank with Philip Green, former chief executive of United Utilities, as chairman.

The consortium of investors is made up of Corsair, Centerbridge and RIT Capital Partners, an investment trust led by Lord Rothschild, plus the Church Commissioners, who are responsible for managing an investment portfolio to support the Church of England’s work across the country.

First estates commissioner Andreas Whittam Smith said: “The Church Commissioners are excited to have the opportunity to be involved in creating a UK challenger bank operating to the highest ethical standards and giving consumers more choice.”

RBS chairman Sir Philip Hampton said: “Williams & Glyn’s will play an important role in the UK banking landscape and will be an excellent new addition to the market, with a particular strength in small business banking – a sector that is so crucial to the UK’s economic recovery.

A £1.6bn deal to sell the branches to Santander fell through last year, and RBS reverted to its long-running plan to offload them through the creation of a new bank, reviving the William & Glyn’s brand.

The news follows the revival of TSB after another state-backed bank, Lloyds, was forced to hive off more than 600 of its branches.

Williams & Glyn’s 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 manage a £5.5bn investment fund including shares, real estate and other investments.

Its aims are to support poorer dioceses with administrative costs, provide funds for missionaries, pay for bishops and some cathedral costs, as well as administer reorganisations and church building closures. It also pays pensions for clergy for service before 1998 and runs the national payroll for serving and retired clergy.

The Church Commissioners already have exposure to financial institutions and banks through their investment portfolio but this is understood to be the first time they have been involved as a “cornerstone” investor in a new venture.

RBS is expected to disappear as a branch network in England and Wales as a result of the deal, though the group will continue to operate through NatWest, which it acquired in a takeover in 2000.

Williams & Glyn’s began trading in 1970 after the merger of RBS brands Williams Deacon’s Bank and Glyn Mills & Co and the newly-acquired National Commercial Bank of Scotland.

The business advertised itself as a friendly alternative to the larger high street banks, having shorter lines of command and a flexible approach to customers’ financial problems.

At the time of its full merger with its parent company in 1985, it held 1.2 million accounts and employed 6,600 people at 332 branches.