Santander set to win £2bn RBS auction

The Spanish lender Banco Santander appeared last night to be a racing certainty to win the auction for 318 Royal Bank of Scotland branches in the UK, which are being sold under the revived Williams & Glyn brand after National Australia Bank pulled out of the auction.

The branches, which are likely to fetch up to £2bn, were put on the block to satisfy EU regulators. They demanded the disposals as a consequence of the billions of pounds of state aid that has been injected into RBS, now 84 per cent-owned by British taxpayers.

The auction process has already seen the departure of Virgin and a possible bid by private equity investor Blackstone in concert with the Wellcome Trust.

Banco Santander is keen to secure the RBS business because it addresses a significant weakness in its UK portfolio. The branches come with a large slug of business clients, something Santander's existing operations, including Abbey, Alliance & Leicester and parts of Bradford & Bingley, are notably light on. Several hundred Lloyds branches are also due to come on the market for similar reasons. Northern Rock's "good bank" could also be privatised, though there are calls for it to be remutualised as a building society. The RBS branches would, on their own, amount to Britain's sixth-biggest bank. Santander has been seen as the favourite to buy the operation from the outset and could reap significant synergies by combining it with its existing operations, something several of its rivals could not.

National Australia Bank could combine the unit with Clydesdale and Yorkshire Bank, but declined to raise its bid after being asked. There have been conflicting reports about Santander's Spanish rival BBVA, but it would find it tough to out compete Santander, which could partially float the UK arm to raise capital.