Is RBS considering selling Churchill? Ooooh, yes

Royal Bank of Scotland is believed to be considering a public listing of the car insurer Churchill, famous for the nodding bulldog originally voiced by comedian Bob Mortimer. Sources close to RBS say that its advisers, Morgan Stanley and Hoare Govett, have broached the idea of selling the business to net the ailing bank billions of pounds.

The sell off, which sources say could come as soon as the first quarter of next year, would also help RBS's chief executive, Stephen Hester, ahead of a decision from the European Competition Commissioner, Neelie Kroes, over forced asset sales.

Ms Kroes leaves her post at the end of the month when she will likely tell RBS which assets, if any, it will have to sell because of its reliance on state aid pumped into the company by the British government in the past year.

A source familiar with the situation said of a possible Churchill sale: "Nothing should be sacred so it's a sensible move for RBS to reconsider its position on its insurance businesses. When Hester abandoned the sell off of the insurance business earlier in the year the market was in a very different place. Flotations are definitely back and I think there could be plenty of interest in such a listing."

Any sale of Churchill or the bank's other insurance businesses such as Direct Line, would be seen as a U-turn by the City, after Mr Hester abandoned the lengthy sale process of the bank's insurance arm in February. At the time he said: "Given RBS's broader considerations, it was important to test the market for this business [RBS insurance], which has demonstrated that a sale on terms currently available would destroy value for RBS shareholders."

RBS, which had sought offers of as much as £7bn for its insurance arm but instead received much lower bids, is the second-largest general insurer in Britain. Its insurance business, which as well as Churchill and Direct Line includes the Privilege brand, employs around 18,000 people.

RBS is thought to be close to agreeing a placing with investors of up to £5bn. City investors are thought to be keen to back such a placing, which would allow RBS to cut its reliance on the government's expensive Asset Protection Scheme insurance.

An RBS spokesman said there were no immediate plans for Churchill.