Royal Bank of Scotland said today that it would have to sell more of its businesses than originally planned to gain European approval for state support.
RBS – reportedly ordered to sell its Churchill and Direct Line insurance arm and part of its investment banking business – said negotiations were close to conclusion and would “include some divestments not initially contemplated”.
“It remains RBS’s goal that any required divestments do not threaten its recovery plan which is already under way,” the bank said.
The enforced sell-offs come on top of an expected major sale of 312 RBS branches in England under the revived Williams & Glyn's name, which is still owned by the bank.
RBS is currently 70% owned by the taxpayer but this is set to rise to around 84% when the bank insures hundreds of billions of pounds in toxic debt with the taxpayer under the Asset Protection Scheme (APS).
When the scheme was announced in February, RBS said it would put £325bn (€360.5bn) in bad loans into the APS, under which it pays a fee with new shares to have 90% of the debts insured by the taxpayer.
The amount insured will reportedly now be around £270bn (€299bn) to reflect easing economic conditions.
The bank, which said it was “close to agreement” with the Treasury, added: “RBS expects the agreement on the APS to reflect market improvements since February and RBS’s ongoing recovery whilst giving protection against future potential stressed case losses.”
RBS is poised to make further announcements on the APS and state aid agreement by Friday, when the firm unveils its third-quarter results.
Chancellor Alistair Darling yesterday confirmed plans for a carve-up of state-backed banks to increase competition in the sector as Northern Rock, RBS and Lloyds Banking Group are re-privatised.
Lloyds – 43% state owned – is expected to give details of its own fundraising plans to avoid the APS scheme tomorrow. It is likely to be forced into sell-offs including its Cheltenham & Gloucester branches.