RBS to sell 318 branches to Santander

Royal Bank of Scotland announced today that it has reached a deal to sell 318 branches to Spanish banking giant Santander.

The long-awaited sale, which comprises 311 RBS-branded branches in England and Wales and seven NatWest sites in Scotland, is set to bolster Santander's position in the business banking sector.

RBS - 83% owned by the taxpayer - is disposing of the assets in order to appease European competition concerns.

The sale, which will take up to 18 months to complete, will see Santander pay a premium of £350 million on the value of the assets.

Santander, which estimated the value of the deal at around £1.65 billion, said the move significantly accelerated its plans in the small and medium-sized business (SME) sector by increasing its market share from 3% to more than 8%.

The acquisition includes 40 SME banking centres and more than 400 business relationship managers, as well as four corporate banking centres and three private banking centres.

The businesses serve 1.8 million retail customers, around 244,000 SME customers and 1,200 mid-sized corporate customers.

The deal comes as the UK banking sector faces up to accusations that it has been reluctant to increase lending to business customers.

Chief executive Antonio Horta-Osorio said Santander increased lending to SMEs by 16% last year, rising to 21% in the first half of 2010.

He added: "The RBS and NatWest branch acquisition will accelerate our growth and improve competition in a sector vital to the UK economy."

The Abbey and Alliance & Leicester owner was the frontrunner in the auction of the branches due to its determination to gain a stronger footing in UK business banking.

Its mortgage dominance will prevent it from bidding for Northern Rock or the parts of Lloyds Banking Group which are also due to be sold.

RBS has also been ordered to sell its insurance business by the European Commission, which includes the Direct Line, Green Flag, Churchill and Privilege businesses.