RBS to sell more businesses than planned

Click to follow
The Independent Online

Royal Bank of Scotland said today that it would have to sell more of its businesses than originally planned to gain European approval for state support.

RBS - reportedly ordered to sell its Churchill and Direct Line insurance arm and part of its investment banking business - said negotiations were close to conclusion and would "include some divestments not initially contemplated".

"It remains RBS's goal that any required divestments do not threaten its recovery plan which is already under way," the bank said.

The enforced sell-offs come on top of an expected major sale of 312 RBS branches in England under the revived Williams & Glyn's name, which is still owned by the bank.

RBS is currently 70 per cent owned by the taxpayer but this is set to rise to around 84 per cent when the bank insures hundreds of billions of pounds in toxic debt with the taxpayer under the Asset Protection Scheme (APS).

When the scheme was announced in February, RBS said it would put £325 billion in bad loans into the APS, under which it pays a fee with new shares to have 90 per cent of the debts insured by the taxpayer.

The amount insured will reportedly now be around £270 billion to reflect easing economic conditions.

The bank, which said it was "close to agreement" with the Treasury, added: "RBS expects the agreement on the APS to reflect market improvements since February and RBS's ongoing recovery whilst giving protection against future potential stressed case losses."

RBS is poised to make further announcements on the APS and state aid agreement by Friday, when the firm unveils its third-quarter results.

Chancellor Alistair Darling yesterday confirmed plans for a carve-up of state-backed banks to increase competition in the sector as Northern Rock, RBS and Lloyds Banking Group are re-privatised.

Lloyds - 43 per cent state owned - is expected to give details of its own fundraising plans to avoid the APS scheme tomorrow. It is likely to be forced into sell-offs including its Cheltenham & Gloucester branches.

Shares in RBS tumbled as much as 17 per cent as markets reacted to news of the unexpected sales before recovering much of the ground.

The taxpayer has pumped in £20 billion into the bank so far but is currently sitting on paper losses of around £4.5 billion on its stake.