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Santander completes RBS acquisition in UK and shows the way to RBS and Lloyds

Banco de Santander

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RBS had sold 318 of its UK branches after repurposing them in 2009 as Williams and Glyn. Banco Santander had used the opportunity to further its footprint in the UK on top of its purchases of retail customer business and branches at Abbey National, Bradford and Bingley and even Alliance and Leicester which have all been completed.

RBS has lost the plot

RBS had received more than $81 bln fo rbailout cash and as part of the deal, it had to sell of parts of its UK presence. It also chose to sell off most of its international presence to beef up capital and re enter those markets In India, Malaysia and china it sold its assets to SCB and HSBC. HSBC picked up the regulatorily sensitive business in India but has been able to get approval from the regulator for various reasons. ( see Foreign Banks in india)

Apart from regulatory costs in Asia, the home sale in UK is delayed as Banco Santander completes the purposing of the erstwhile branches and transfers all the customers Banco Santander had always expected the transfer to be competed by February 2012 18 months after the deal was signed however has the consolation of watching Lloyds, now led by the ex Banco Santander CEO which has to sell 600 of its branches to satisfy EU conditionality this year RBS has cut 21000 jobs in the UK and is likely to cut 5000 more this year taking its global job reductions since 2009 to 32000. (read internal memo here)

RBS has already paid the highest fines in the PPI indictment and even as it struggles with loss making assets and a dull economy made duller by a negative mortgage market and the new Vickers report proposals for ringfencing retail deposits from corporate lending and any capital for investment banking and trading operations

The cost of ringfencing

The Vickers’ Report has suggested a new minimum of 10% capital for ringfenced retail operations which Santander and Lloyds have represented would make the cst to customers of the retail bank prohibitive. The banks are likely to end up recovering potential profits  in terms of charges on retail as already evidenced in the USA after new Credit/Debit card regulation and limits on Bank charges were pulled on banks in 2009/2010. The Vickers Report recommends ringfencing and a much higher supercharge of nearly 3% after the US recommended an additional 1-2% charge on its top SIFI banks over the new Basel 3 regulatory charges in effect completely by 2019

Banco Santander moves on its London listing plan

given market conditions in 2009 the Bank could not follow up on its plan to seek a listing in the UK and is now moving ahead with its pla for a $5 bln IPO in London( GBP 3 bln)

RBS remains deeply mired in losses and has almost been written off with no retail prospects in the UK while Banco Santander has emerged stronger despite a Spanish sovereign debt crisis making limited but reasonable profits in its operations outside Spain even as Spain remains 25% of its revenues in H1 2011 It additionally suffered losses in some key markets in LatAm such as Brazil.

HSBC’s RBS purchase in India rejected by RBI

RBS had committed to HSBC towards the sale of all its 31 branches and 100 retail / wealth staff to HSBC. It is yet questionable if HSBC could have absorbed all 1800 staff which continues to operate as ABN AMRO in the country since License transfers are a throny issue that from the point of view of the regulator should not have risen as the occasion to sell in each case is in question.

Since the deal signing in 2009/2010 when ANZ lost to the HSBC bid in India and Malaysia, there has been speculation peculiar to the Indian regulator’s national requirements. None of the speculated objections have yet been resolved, additionally with RBS and ABN planning to come back to the country RBI has taken a harder stance on this apparent tomfoolery with buying and selling branches and networks . Among the first nonsensical results of imediate interest to RBI would have been the multiplicity of licences for the acquiring bank and the lack of branch approvals for HSBC once it as acquiring bank had surrendered the second licence per law with RBS. Even before the assumed non-event(buyers/sellers) though RBI has now found itself troubled by the fact that RBS wll continue to live in the country in isolation as also ANZ ( in its TV appearance by CEO Mike Smith on Bankers’ Trust – B-UTV) plans to remain only in institutional business in India. ANZ, ICBC have one branch each in the new avatar, the most planned by RBS in its new role as a exclusively wholesal player in the country.

Media reports make it clear that RBI has made a unitary objection on the sale – that of the 32% priority lending commitment which precludes any option without retail branches and in factas the new charter sugggests, new branches in Tier 5 and 6 town.

Priority sector requirements are not new and all the 32 license holders in the country manage the same lending requirement without their own branches in the rural hinterland. Obviously those wholesale approaches are not the objective of the Priority sector lenbdiong regulation.

RBI is also likely to question other European Banks for bringign business into india afresh as English and French banks continue a spiral of capital degrowth incl SocGen, BNP  and RBS. Some such a s Lloyds have not shown interest in international business again under pressure to wipe out losses and others yet like BofA and Barclays are having issues in specific segments like Mortgages and Inter Bank Capital limits imposed by new Basel regulations.

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One comment on “Santander completes RBS acquisition in UK and shows the way to RBS and Lloyds

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