Clydesdale moves on Williams & Glyn business

The sale of the tranche of branches, packaged under the reprised Williams & Glyn brand, should have been completed by 2013 but has instead turned into a long-running saga with previous deals involving Santander already falling through.

Clydesdale’s interest follows its flotation on the London Stock Exchange, along with Yorkshire Bank under the CYBG name, in February by National Australia Bank, which still owns a controlling stake in the group.

A statement from CYBG said it has a “duty to continually evaluate all potential opportunities to enhance its business”, although it stressed that it would “only evaluate combinations that are in line with the company’s strategic objectives”.

It added: “The Board of CYBG can confirm that the company has engaged in discussions with RBS and has made a preliminary non-binding proposal to RBS in relation to its Williams & Glyn operations.

“This engagement is ongoing and there can be no certainty that any transaction will occur, nor as to the terms on which any transaction might be concluded. A transaction will only be pursued if it is determined by the board to be in the best interests of CYBG shareholders.”

RBS said: “There is interest in the business and this remains the case.”

Spanish banking giant Santander ended its interest in Williams & Glyn last month with sources citing a disagreement over the price.

European regulators have demanded that a portion of Edinburgh-based RBS be cleaved off as a condition of its huge state bailout at the height of the financial crisis to prevent Britain’s biggest lender to small businesses from having an unfair advantage and posing a systemic threat to the UK economy.

Failure to meet the 2013 deadline for the sale of 300 of its branches has been blamed by RBS bosses on the cost and complexities of creating a separate IT system for the jettisoned business.

RBS has put the cost of the project at about £1.5 billion.

Bailed-out Lloyds, which has spun off TSB under a similar EU directive, spent almost £2 billion on separating its 631 branches.

RBS must now complete a sale by the end of next year.

The Williams & Glyn brand was created in 1969 after RBS merged with the National Commercial Bank and went on to be used in 326 branches in England and Wales before it was abandoned in 1985.

Its modern reincarnation will have 300 branches, 1.8 million customers, loans worth £20 billion and deposits of £24 billion, making it one of the UK’s largest prospective “challenger” bank brands.

After its eventual sale it will have the potential to win market share in the small business banking sector from Lloyds and RBS itself.

Since its flotation at the start of the year, Clydesdale has seen its share price rise more than 40 per cent, valuing it at almost £2.4 billion.

Meanwhile, shares in RBS, which reports third quarter results on Friday, have fallen by 36 per cent during the course of 2016.