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Orphaned RBS Branches May (Or May Not) Find a New Home

Consumer-oriented Nationwide mutual society in the United Kingdom has acknowledged it is considering a strategic extension of its business with small and medium enterprises, which would include new programs in lending and commercial finance. Against that background, Nationwide's senior management is considering the wisdom of kick-starting the business by acquiring the 316 branches of RBS, which are subject to forced sale.

Graham Beale, Nationwide’s chief executive, acknowledged his firm's possible interest to Reuters:

"Strategically we want to enter into the SME space. If there's anything I could do that would accelerate our strategy it would be of interest," he told Reuters.
Beale said Nationwide was running the rule over the branches but would only proceed if it was convinced the complexities involved in executing a deal could be overcome."

All potentially interested parties are well aware that RBS had agreed the sale of these branches to the UK arm of Spain's Banco Santander more than two years ago. In October 2012, Santander withdrew its offer, paying a penalty but untangling itself from an IT integration task that proved far more daunting than had been expected.

Beale continued to Reuters:

"There are clearly some enormous complexities there, otherwise that deal would have been done. We need to understand just what those issues are before we can be committal on the point," he said.

Beale said he anticipated difficulties in separating the business from RBS as it was not a standalone entity but an amalgamation of assets embedded in a whole host of systems.

RBS proposed sale of 316 branches, dictated as a condition of the bank's government-funded bailout in 2008, is clearly an unusual opportunity in the UK market. It remains to be seen whether "unusual" will translate into a unique opportunity for a financial group such as Nationwide, or a uniquely misguided choice by the regulators, having required the sale of assets which are virtually impossible to segregate (in a technology sense) from the remainder of the bank.

Click here to read more from Reuters and here to read more from Commercial Finance Group.

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