Financial News

  • 25 July 2014, 7:30

RBS Stands Ground Over Cable Branch Criticism

Royal Bank of Scotland (RBS) has warned Vince Cable that accelerating the sale of 314 branches would jeopardise the creation of a strong new lender on British high streets.

Sky News has learnt that RBS, which is majority-owned by taxpayers, wrote to Mr Cable on Thursday in response to criticism about the pace at which the bank is carving out what will become one of the country's 10 largest banks.

Ross McEwan, RBS's chief executive, is anxious to avoid a public spat with Mr Cable, but told him that the bank had already spent in the region of 1bn on carving out the branch network and that significantly accelerating a timetable agreed with the Treasury would not be feasible.

People familiar with Mr McEwan's letter said that the RBS boss had been "frustrated" by Mr Cable's letter last week, which was sent the day before Britain's competition watchdog announced that it was minded to conduct a full inquiry into the current account and small business banking markets.

Mr McEwan is understood to have told Mr Cable in his response that RBS was committed to ensuring the separation is executed properly in order to create an effective standalone challenger bank.

He believes that acceding to Mr Cable's request to rebrand the branches in the near term would be a dangerous move before IT and other systems are established and operating properly.

Under the planned timetable for disposing of the branches, which will see the return of the Williams & Glyn brand to high streets, RBS will pursue a stock market listing by the end of 2016, with a significant stake being sold to external investors, including the Church of England's pension fund.

RBS has also committed to selling the remainder of its stake by the end of 2017.

The business will have 1.4 million retail customers, approximately 200,000 SME clients and employs 4,500 people.

The outside investors, which also include private equity firm Corsair Capital and Centerbridge, are said to be supportive of the planned timetable and the progress that RBS is making with the divestment, insiders said.

RBS had planned to sell the business, codenamed Project Rainbow, to Santander UK, but the deal collapsed in 2012 after more than two years of talks.

Unlike Lloyds Banking Group's sale of TSB, W&G will not use its former parent's systems but entirely new infrastructure.

In his letter to Mr McEwan last week, the Business Secretary wrote that the protracted timetable for the sale "risks reducing the impact of the full divestment when it comes, including because it could increase the possibility of gradual erosion of the divested business's customer base".

He added: "I trust RBS will take all necessary steps to support the management of the new bank in the meantime on regulatory matters, and to give them the right combination of support and freedom so they can begin to develop their own products, brand positioning and distinctive culture."

Insiders pointed out that the development of a full portfolio of products under the W&G brand would be impossible until new systems were in place.

Earlier this week, RBS was criticised by Andrew Tyrie, chair of the Treasury Select Committee, over evidence given to it by two of the bank's executives relating to the unit which oversees distressed companies.

Mr Tyrie said the bosses had been "wilfully obtuse".

RBS declined to comment.

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