RBS plans branch IPO after Santander failure



The Royal Bank of Scotland (NYSE: RBS - news) plans to float the 316 branches it failed to sell to Santander (Madrid: SAN.MC - news) after a lack of strong interest from trade bidders.

The Sunday Telegraph understands that after talks with its own investors, RBS (LSE: RBS.L - news) is now pushing ahead with a £1bn initial public offering (IPO) of the business, known internally as Project Rainbow.

The decision, taken in the past fortnight, will end the three-month twin-track process which has seen the bank attempt to find trade bidders to begin an auction for Rainbow, which includes 1.8m retail bank customers and 250,000 business accounts.

RBS is selling the business at the behest of the European Commission.

Senior banking sources confirmed an IPO is now the “main option”, despite strong interest from Virgin Money, and several private equity firms. UK Financial Investments, which manages the Government’s 81pc stake in RBS, is understood to be backing the push for a stock market float.

One RBS investor said that attempts to find would-be trade buyers, led by investment bank UBS (Berlin: UBRA.BE - news) , had shown that “people are not gagging for the asset”.

The push follows a rise in the value of bank shares in recent months now trading at approximately 0.8 times book value.

An IPO would allow RBS to dispose of the unit cleanly. In addition to the lack of significant interest from third parties, sources indicated that concern over transferring Rainbow’s technology to another operator was of concern.

That in part led to the collapse of the £1.65bn Santander deal .

It is believed RBS management, led by chief executive Stephen Hester, feels it is simpler to pursue an IPO and build a new platform into the bargain.

It should be stressed, however, that were an attractive bid to be made at some point leading up to an IPO, it would not be ruled out.

The exact shape of Rainbow’s IPO is not yet finalised, with a straight float or a reversal into a new cash shell both options.

RBS and UKFI both declined to comment.