LONDON — Royal Bank of Scotland (RBS) stock is jumping on Monday morning after the bank confirmed that it probably won’t have to spin out its Williams & Glyn bank after all.
Shares in Royal Bank of Scotland are up over 5% after almost half an hour’s trade in London. It comes after RBS said that the EU is reviewing the bank’s state aid obligations and will likely not force it to spin out Williams & Glyn, which it has been trying and struggling to do for several years. The news was first announced on Saturday.
RBS has struggled to sell its W&G unit for years and spend £1.3 billion trying to carve it out. The spin-off was agreed as part of the bank’s £45 billion government bailout during the financial crisis to satisfy EU state aid rules.
The Treasury is now proposing that the bank to provides £750 million to set up a new fund for challenger banks to help boost funding to small and medium-sized businesses (SMEs). The EU commission still needs to approve the plan.
RBS CEO Ross McEwan says in Monday’s statement: “Today’s proposal would provide a path to increased competition in the SME marketplace. If agreed it would deliver an outcome on our EC State Aid divestment obligations more quickly and with more certainty than undertaking a difficult and complex sale and would provide much-needed certainty for customers and staff.”
Jefferies analyst Joseph Dickerson says in a note on Monday morning: “All of the above is subject to approval by the EC and, if approved, could clear a potential hurdle to the return of any excess capital, though also adds operational complexity and the life of these SME fund arrangements is unknown. Overall the prospective deal looks better for the “eligible challenger banks” than for RBS.”