Spanish Bank, Santander, bids to acquire Royal Bank of Scotland's 318 branches in UK for approx £1.8 billion

Banco Santander SA (STD), a Spanish bank, emerged as the lone bidder for Royal Bank of Scotland Group PLC’s 318 branches in the UK. It is expected that the Spanish bank will now go into exclusive talks with RBS in a few days time, a privy source reported on Tuesday. If the talks succeed, Santander and RBS will conclude the deal, estimated at approximately £1.8 billion, in a few weeks’ time.


Banco Bilbao Vizcaya Argentaria SA (BBVA), another Spanish contending bank for RBS, was the only bank that did not opt out of the bid for RBS’ assets. However, privy sources confirm that BBVA was using the RBS offer as a chance to study the UK market, as opposed to posing a serious bid for RBS. Should the RBS branches acquisition go through now, Santander hopes to increase its presence in the UK, where it currently has a network of 1,300 bank branches. Initially, analysts believe Santander had bid about £2 billion for RBS assets but abridged its offer after carrying out a due diligence study.


The sale of RBS assets comes in the wake of the 2008 financial meltdown that saw the bank almost crumple, necessitating the biggest ever state aid globally to help it stay afloat. RBS is 83% owned by government and has been ordered by the European Union to reduce market shares in particular segments to ensure it is not at a competitive advantage to its competitors that remained independent during the crisis.


The banks in the acquisition bid by the Spanish banker are in England and Wales, together with NatWest branches in Scotland. BBVA, the other bidder for RBS assets, has three UK branches and if it had seriously bid for RBS, winning the bid would mean the bank has to make major investments in infrastructure for their new operations. BBVA chairman, Francisco Gonzalez, said the bank had more investment expansion interest in the UK and Asia, confirming analysts suggestions that its bid was merely intended to observe and study the UK markets.


For Santander though, the UK has proven itself as a key growth driver, courtesy of active deal making and the weakness of competing banks. Its chairman, Emilio Botin, said last week that he expects about 17% of the bank’s operating 2010 profit to be derived from its UK business, an increase from 2009’s 16%.


June 17, 2010.