RBS sells Tesco holding in fund-raising bid

Royal Bank of Scotland is this week expected to raise £950m (€1.2bn) through the sale of its stake in Tesco Personal Finance to the supermarket giant.

The disposal of RBS’s 50% holding comes amid ongoing attempts by the NatWest owner to shore up its battered balance sheet.

It recently raised £12bn (€15.2bn) from a rights issue, but attempts to secure another £7bn (€8.9bn) from the sale of its Churchill and Direct Line insurance business look likely to be frustrated.

Reports this weekend said RBS boss Fred Goodwin may decide to keep the operations because buyers have drifted away.

Final offers are due by the end of this month, but the Financial Times said US insurer Allstate was the only remaining serious bidder for the assets. Most analysts think £5bn (€6.3bn) is the most that RBS can hope for.

Sentiment in the insurance sector took a further hit last week after a profits warning from German reinsurance giant Munich Re.

As well as £12bn (€15.2bn) from the right issue, RBS has sold Angel Trains, its train leasing subsidiary, for an estimated profit of up to £300m (€380m).

It is also in talks about selling the Australian and New Zealand operations acquired as part of last year’s joint bid for ABN Amro.

Commonwealth Bank of Australia is seen as the favourite to land the investment and wholesale banking business, which could be worth up to £400m (€507m). National Australia Bank, which owns the Clydesdale and Yorkshire banks in the UK, pulled out of the running last week.

Meanwhile, Tesco is expected to appoint Benny Higgins – the former boss of retail banking at Halifax Bank of Scotland – as head of Tesco Personal Finance.

It is thought that RBS would provide banking services to Tesco Personal Finance for an interim period while the supermarket applies for its own banking licence from the Financial Services Authority.