Reuters – UK’s Nationwide Eyes RBS Branches

UK financial services group Nationwide is interested in bidding for 316 branches being sold by Royal Bank of Scotland to speed up its expansion into lending to small and medium-sized businesses, writes Reuters. A 1.65-billion-pound ($2.6 billion) deal to sell the branches collapsed last month after Spanish bidder Santander said the process of carving out the business had proved more difficult than expected, writes Reuters.

Reuters – Nationwide, Britain’s biggest customer-owned financial services group, is interested in bidding for 316 branches being sold by Royal Bank of Scotland to speed up its expansion into lending to small and medium-sized businesses.

A 1.65-billion-pound ($2.6 billion) deal to sell the branches collapsed last month after Spanish bidder Santander said the process of carving out the business had proved more difficult than expected.

RBS, ordered to sell the branches as a condition of winning European approval for a state bailout during the 2008 financial crisis, has sent new sales documents to prospective buyers, and is hoping to draw up a shortlist next month.

“Strategically we want to enter into the SME (small and medium-sized enterprise) space. If there’s anything I could do that would accelerate our strategy it would be of interest,” Nationwide Chief Executive Graham Beale told Reuters on Tuesday.

“Within that context, RBS is something which we will watch very carefully.”

Beale said Nationwide was running the rule over the branches but would only proceed if it was convinced the complexities involved in executing a deal could be overcome.

“There are clearly some enormous complexities there, otherwise that deal would have been done. We need to understand just what those issues are before we can be committal on the point,” he said.

Santander agreed to buy the branches and the business of 1.8 million customers in August 2010 but technology and separation issues pushed back the original December 2011 completion date and the bank eventually concluded that a deal could not be reached in a reasonable timeframe.

Sources close to the matter have said businessman Richard Branson’s Virgin Money and U.S. private equity firm J.C. Flowers are also interested in buying the branches, though any deal is expected to fall short of the price agreed with Santander.

Nationwide also said it had set aside a further 45 million pounds to compensate customers mis-sold loan insurance, joining rivals in stepping up provisions and taking its total compensation bill to 173 million pounds.

The cost of the compensation for the rising level of payment protection insurance (PPI) claims, along with higher impairment charges in Nationwide’s commercial lending division, led to a decline in first-half underlying profit to 151 million pounds, against 181 million pounds the previous year.

“Losses on our commercial property loans have increased over the past 12 months and, in addition, we continue to see elevated levels of PPI claims,” Beale said.

Britain’s financial services industry could face a total bill of more than 15 billion pounds to cover compensation payouts for one of the country’s biggest mis-selling scandals.

PPI policies were typically taken out alongside a personal loan or mortgage to cover repayments if customers fell ill or lost their job, but they were often sold to people who would not have been eligible to claim on the policies.

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