Spain’s Santander is set to acquire 318 high street branches from the UK’s Royal Bank of Scotland as the only bidder left in a sale process that ends today.
The Spanish bank, which is the largest in Europe, made an indicative offer of about £2 billion in April to buy the branches the European Union is forcing RBS to sell, following its government bailout during the credit crunch.
The bid is for 318 RBS branches, part of the former William & Glyn network, plus six NatWest branches in Scotland.
Santander's purchase would lift its share in the UK's small and medium-sized company market to about nine per cent from three per cent currently. The bank controls 14 per cent of the UK mortgage market and 10 per cent of retail savings and overall branches.
Santander has eight million current account holders in the UK and would gain another 1.1 million through the RBS deal.
It has been able to offer a top price for the RBS assets as it has the economies of scale and banking infrastructure to enable it to make significant cost savings.
Santander plans extensive growth in the UK, having already bought Abbey National, Bradford & Bingley and Alliance & Leicester. The company has said in the past that floating its UK business on the stock market was a possibility. It earned €1.4 billion out of the partial stock market listing of its Brazilian unit last year, during which it sold around 25 per cent of the business.
Unlike many other smaller Spanish banks, Santander weathered the global financial meltdown by selling parts of its property portfolio just as the market started to plunge in 2007. The bank also has extensive interests in South America, a region which has been less affected by the US sub-prime mortgage crisis.
Santander recently said it expected this year to match last year's €8.9 billion profits. The bank's UK business posted annual profits of £1.5 billion in 2009, up 30 per cent from the previous year.
RBS, which is 84 per cent controlled by the UK taxpayer, has until 2013 to sell the branches, and is permitted to decline any offers below the asking price.
The bank recently made its debut in the covered bond market—where banks issue bonds backed up by their loan portfolio. The bank raised €1.25 billion, after attracting €1.9 billion of orders from nearly 100 different investors.
Last year RBS announced it expected a record £28 billion loss, linked to bad loans and the fall in value of toxic assets. It has sold its European commodities business to JP Morgan for $1.7 billion.
