Local technology glitch snares Royal Bank of Scotland’s disposal plans

A technology glitch centred around six branches in Scotland is hampering Royal Bank of Scotland’s (RBS) plan to offload its Williams & Glyn retail banking unit and resume dividend payments to shareholders.

When RBS agreed to sell Williams & Glyn, which oversees more than 300 RBS and NatWest branches in England, Scotland and Wales, in 2009, it hoped to do so within months.

Almost seven years later, it is still struggling to divest the business, with a tangled web of technology causing six branches scattered across its home country to become a major issue.

Chief executive Ross McEwan’s saga to separate the consumer unit is facing difficulty from the handful of NatWest branches in Scotland that operate on different systems than the rest of the unit. 

They add to complications that are causing spiralling costs, new products to be put on ice, and a longer wait for dividends.

The best laid schemes of Mr McEwan and his predecessor, Stephen Hester, are being held back by technology systems that have been patched together and modified over decades. 

Even though RBS is spending about £50m (€64m) a month on spinning off the branches, it risks missing an EU deadline to divest the unit.

The unit represents about 14% of RBS’ total branch network.

In 2009, RBS agreed to sell the 314 branches as a condition set by the EU for its bailout during the financial crisis. 

Efforts to offload the branches through a sale or initial public offering have suffered a series of setbacks since the EU mandate.

The most notable was in October 2012 when Santander abandoned its bid originally agreed in 2010, citing completion delays.

Britain subsequently had to ask the EU to extend an initial deadline to divest the outlets by 2014. 

Last month, the UK bank warned it may miss the current timetable to sell Williams & Glyn by the end of 2017.

“The delay of the spinoff kicks dividend payments into the long grass, and probably means investors will have endured a decade-long dividend drought before the bank starts making payments again,” Laith Khalaf, senior analyst at Hargreaves Lansdown said in an email.

Bloomberg


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