Royal Bank of Scotland Group could create a new fintech fund as part of a plan to promote competition in the UK retail banking market, after the lender revealed it wants to abandon the sale of about 300 bank branches to meet the conditions of its £46 billion government bailout in 2008. The European Commission, which had to approve the bank's post-crisis bailout and had insisted upon the sale of the branches in return, is now set to consider "an alternative plan for RBS", according to a market statement by the bank today, February 20. The fintech fund would be part of a £750 million package of measures designed to stimulate competition in the market for lending to smaller companies in the UK. The new plan could also involve RBS paying "dowries" to new challenger banks so they take on some of its small-business customers. The plan to offload the 300 branches, either through an initial public offering or sale, had been complicated by the need to separate the branches from RBS's technology systems. The branches had been set to be rebranded as Williams & Glyn, an old name on the high street, and the project has cost RBS roughly £2 billion. Ian Gordon, an analyst at Investec, said in a February 20 note that Virgin Money, the retail lender led by chief executive Jayne-Anne Gadhia, could benefit from RBS's new plan. Rohith Chandra-Rajan and Aman Rakkar, a pair of analysts at Barclays, said the news market another step towards "normalisation" for RBS, which still counts the UK government as its major shareholder. "Addressing these non-operating issues in 2017 should provide a clearer path towards the normalisation of the business, and also brings forward our expectations of dividend resumption to FY17," Chandra-Rajan and Rakkar said in a February 20 note. RBS is among the European banks still feeling the after-effects of the financial crisis. The lender is still awaiting the full cost of an anticipated settlement for its role in the market for US residential mortgage-backed securities prior to the crisis. Rajan and Rakkar were among the analysts who authored a separate research note on the state of banks across Europe. Lenders in the region have seen expectations of rising inflation and interest rates boost their share prices of late, but Barclays said "we are still waiting to see the evidence of this feeding through into the industry-level data". "The recovery in loan growth continues but remains tepid," the Barclays analysts said in the note. They prefer banks that are less dependent on the European Central Bank increasing interest rates soon.
Royal Bank of Scotland Group (RBS) is considering whether to create a fintech fund as part of a £750m ($933m) package designed to promote competition in the UK retail banking market, according to a market statement from the bank this week. To stimulate competition for lending to smaller companies, RBS could pay "dowries" to challenger banks so they can take on some of its small business customers. The announcement came after RBS revealed its plans to abandon the sale of 300 bank branches to meet the conditions of its £46bn government bailout in 2008.