Santander Submits Final Bid For RBS' 318 UK Branches - Source

14th Jun 2010 17:41

By Patricia Kowsmann Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Spain's Banco Santander SA (STD) has submitted a final bid worth up to GBP1.8 billion for Royal Bank of Scotland Group PLC's (RBS) 318 U.K. branches, a person familiar with the situation said, in what is likely to be the only offer put on the table ahead of a Monday evening deadline. If Santander is the sole bidder as expected, it will soon enter into exclusive talks with RBS, and a deal could be closed within weeks, another person told Dow Jones Newswires. Spanish peer Banco Bilbao Vizcaya Argentaria SA (BBVA) was the only other bank not to officially drop out of the race for the assets, but people familiar with the situation said it is using the RBS offer as an opportunity to get more details on the U.K. market, rather than being seriously interested. BBVA has only three U.K. branches, and buying RBS' assets would mean it would have to spend heavily to set up infrastructure for the new operations. Earlier Monday, its chairman, Francisco Gonzalez, said at a conference that the bank is more interested in expanding in the U.S. and Asia. For Santander, however, acquiring the RBS branches will increase its foothold in the country, where it now has a network of around 1,300 banks. The U.K. has become a key growth driver of Santander, thanks to active deal-making and the weakness of rival banks. Chairman Emilio Botin last week said he expects 17% of Santander's operating profit to come from the U.K this year, up from 16% last year. The bank first entered the U.K. market when it purchased Abbey National PLC in 2004, and took a quantum leap during the crisis by snapping up ailing lenders Alliance & Leicester and Bradford & Bingley at fire sale prices at the height of the global banking crisis. According to people familiar with the situation, Santander first put a bid of around GBP2 billion for the RBS assets, but lowered the offer after conducting due diligence over the past weeks. The bank is especially eager to increase its share in the small-to-midsize enterprise market in the U.K., a difficult one to grow organically. RBS has until 2013 to sell the branches under European Union rules, but it has moved fast with the process. The branches up for sale are in England and Wales, along with NatWest branches in Scotland, and the accounts of some SME customers across the U.K. Combined, they have GBP23.6 billion in assets and 6,000 employees. The 83%-government owned RBS received the largest state aid in the world following its near collapse during the financial crisis in 2008. The EU has ordered it to cut market shares in some segments to make sure the bank isn't at a competitive advantage to peers that stayed independent. Santander is the last out of five initial bidders still standing. Others included Richard Branson's privately held Virgin Money and a consortium of Blackstone Group (BX) and U.K. charity Wellcome Trust, both eliminated early in the process. National Australia Bank Ltd. (NAB.AU)--which owns Clydesdale and Yorkshire banks in the country with 340 retail branches--dropped out of the race last week. Those banks will still have a chance to increase their footprint in the U.K. once Lloyds Banking Group PLC (LYG), which is 41%-government owned, and fully nationalized Northern Rock PLC put assets up for sale, also under EU requirements. The U.K. government has said it wants the sales to lead to increased competition in the sector, which was hard hit during the financial crisis. -By Patricia Kowsmann, Dow Jones Newswires. Tel +44(0)207-842-9295, [email protected] (Pablo Dominguez and Christopher Bjork in Spain contributed to this story.) (END) Dow Jones Newswires June 14, 2010 12:41 ET (16:41 GMT)