RBS Says It May Miss Williams & Glyn Sale Deadline -- Update

By Max Colchester 

LONDON--Royal Bank of Scotland Group PLC said Thursday it may struggle to meet a regulatory deadline to split off several hundred bank branches, a major blow to the bank's restructuring plans.

Following its 2008 government bailout, RBS is required under European Union state aid rules to spin off 314 branches. These have been regrouped under the brand Williams & Glyn and need to be disposed of by the end of 2017.

RBS, which is 73% owned by the British government, said there is now "a significant risk" that it won't be able to sell the branches by that deadline. The bank also warned that the cost of separating the unit was likely to be greater than previously estimated. "RBS is exploring alternative means to achieve separation and divestment," the bank said in a statement.

If the bank doesn't meet the 2017 EU deadline, an independent trustee could be appointed to complete the disposal at a rock-bottom price. Additional business restrictions could also be heaped on the beleaguered bank. RBS shares dropped 4% on the news.

RBS had forecast that the project would cost about GBP1.6 billion ($2.32 billion) to break out Williams & Glyn. The lender had initially planned to launch an initial public offering of the unit, but after receiving "a number of informal approaches for the business," it planned to explore a sale to a competitor in the first half of 2016, which it hoped could be done by the end of 2017. Now this looks unlikely, in part due to the technical challenges of creating a new computer system for the new bank.

"The delays could call into question management execution of RBS's restructuring process," Jefferies analysts said in a note.

The process of splitting off the unit has haunted the bank for eight years. Originally the bank was supposed to break out Williams & Glyn by 2013 but this was delayed after Santander UK pulled out of a proposed deal to buy the branches. RBS is due to report its first-quarter earnings on Friday.

Write to Max Colchester at [e-mail]

(END) Dow Jones Newswires

April 28, 2016 10:42 ET (14:42 GMT)

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