The Royal Bank of Scotland (LON:RBS) has agreed to sell the 318 branches and associated assets of its RBS England and Wales and NatWest Scotland branch based business to Santander UK PLC (LON:SAN), an affiliate of Banco Santander SA of Spain (LON:BNC).
Santander UK is paying a premium of £350 million to net assets at closing. The consideration will be paid in cash and is subject to certain closing adjustments, including those relating to the performance of the business. The transaction is currently expected to be completed by December 2011.
The business had total assets of £21.5 billion, customer deposits of £22.4 billion and risk-weighted assets of £15.2 billion as at 31 December 2009. It generated an operating loss of £55 million for 2009. Given significant separation costs to be funded by RBS, the sale is expected to have only a modestly positive impact on the group's Core Tier 1 capital ratio.
Santander UK said in a separate statement the deal includes 311 RBS branches in England and Wales and 7 NatWest branches in Scotland, 40 SME banking centres, more than 400 relationship managers, 4 corporate banking centres and 3 private banking centres. The transaction affects 1.8 million retail customers, around 244,000 SME customers and around 1,200 mid-corporate customers.
RBS chief executive Stephen Hester said: "This is an important milestone in our restructuring work and complements the significant momentum behind our recovery plan overall. The bank is becoming stronger, which allows an increased focus on serving ongoing customers and improving commercial success; all a pre-requisite for the profitable realisation of taxpayers' stake in RBS.
"The separation and transfer process will take 12-18 months to complete and throughout this period we are committed to maintaining good standards of customer service and making the transfer to new ownership as seamless as possible. But for now, customers will not experience any change".
RBS will continue to have a major presence in UK banking, with the second largest retail branch network in the UK, through its NatWest branches in England & Wales and Royal Bank of Scotland branches in Scotland. It will remain a major provider of corporate and business banking services in the UK, and its wealth management business, Coutts, remains a leader in Private Banking. There will be no change for customers or staff at our retained network of more than 1,900 branches across the UK, which collectively serve around 14 million customers.
The divestment of the branches is a requirement under EU State Aid rules, as announced on 14 December 2009, as a result of the EU's approval of RBS's restructuring plan and the State Aid it received.
The required divestments, which will be carried out over a four-year period, also include RBS Insurance, Global Merchant Services and RBS's interest in RBS Sempra Commodities. As already announced on 16 February 2010, RBS has agreed to sell a part of its RBS Sempra operations to JP Morgan and this transaction completed on 1 July 2010.