THE CMA and WILLIAMS & GLYN – THIS SAGA WILL RUN LONGER THAN PEYTON PLACE

 

The following announcement was made by the CMA, concerning Williams & Glyn this morning

“The government is committed to achieving a strong and diverse banking sector to benefit UK customers. HM Treasury previously asked the Competition and Markets Authority (CMA) to assess the likely impact of the latest proposals for the divestment of Williams & Glyn for competition in the UK banking sector.

The divestment of Williams & Glyn represents a great opportunity to improve competition in banking, in particular in the small business banking sector. The divestment is another step in the government’s plan to improve competition in banking that gives real choice to retail and small business customers and supports the wider economy.

The Williams & Glyn business consists of 307 bank branches in the UK, including the RBS branches in England and Wales, and NatWest branches in Scotland. The government expects Williams & Glyn to be able to act as a strong competitive challenger to the incumbent banks.

RBS has told us that they have received informal approaches for the business, so they will now launch a trade sale process in H1 2016, and have told us that they will be able to complete the sale by end 2017. RBS are committed to divesting of W&G as soon as possible, in a way that ensures a smooth transition for customers and delivers value for taxpayers, within the mandated deadlines of the State aid agreement with the European Commission.

In light of RBS’s decision to launch a trade sale process, which would be likely to raise different issues from an IPO depending on the identity of a buyer and which would be subject to merger control as appropriate, we have asked the CMA to suspend its work on the review for now.”

 

When the banks hit the rocks in 2008, resulting in the Government taking RBS and Lloyds Banking Group in to public ownership, the EU in its infinite wisdom and majesty forced RBS/government to divest its self of 307 branches. Corsair was one of two interested parties that put a consortium bid together (49% owned by Corsair and the rest by RBS) that met the government’s criteria, which gave them the mandate to build W&G. Corsair, probably had more political clout thanks to Lord Mervyn Davies who fronted up the operation, rather than financial engineering prowess, which was the Higginson’s team’s métier. Prior to any IPO transpiring, the Cooperative Bank became the preferred buyer until it transpired that there was a £2.5 billion capital shortfall. Then Santander had a looked but decided against it.

 

For a couple of years RBS/Corsair has been going through the application process with the PRA. A consortium including Corsair Capital, Centerbridge Capital and the Church of England invested £600 million into the business in September 2013, in exchange for equity once the bank is floated in an IPO. RBS is required by the EU’s ruling to sell its full holding in the business by the end of 2017. Williams & Glyn will have approximately 250,000 small business customers, 1,200 medium business customers and 1.8 million personal banking customers.

 

A couple of months ago The Sunday Times claimed that Banco Sabadell, owners of TSB, was in the frame. I have reason to believe that that is quite wrong, as Sabadell has too much on its plate already with TSB. However there is definitely interest in challenger banks that have real traction from international investors. There is also talk of some of the challenger banks not making it and therefore being ripe for consolidation. W&G were looking for NEDs to help them with the Authorisation process as they were finding that the PRA were not rolling over because of the RBS connection.

 

I am staggered that it has taken seven years to be nowhere near close to bringing this painful transaction to a satisfactory conclusion. This is just a classic example why I absolutely abhor the idea of the EU interfering with the regulation of our banking system. The EU brings nothing to our party but confusion and irritation. The culture of UK banks as against EU banks is as different as chalk from cheese. A deal hiving off W&G or a regional part of the bank could easily have been done without EU’s size 12 hob-nailed boots.

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