The investment bankers will start meeting investors later this year to prepare the ground for the IPO, asking what those investors want to see in a new bank and how much they might be prepared to pay for Williams and Glyn. RBS is also in the process of applying for a banking licence for Williams and Glyn. Once that has been approved by the Bank of England, its business plan will be sent on to the Competition and Markets Authority, which has been asked the study the new bank and to verify that it will be an effective challenger in the market. If not, RBS could have to bulk up the spin-off even more. Since early 2014 a swathe of banks have floated on the stock market, including TSB, Virgin Money, Aldermore and Shawbrook and all have seen their shares rise by around 40pc, giving RBS hope that investors will lap up the shares in Williams and Glyn. The European Commission ordered RBS to create a viable challenger bank under the terms of its 2008 taxpayer bailout, in a bid to cut RBS’ size and to promote competition in the market. It will consist of 308 branches, made up of RBS’ Royal Bank of Scotland branches in England, and its NatWest branches in Scotland. However, the project proved more costly and difficult than officials anticipated, causing RBS to miss its first deadline of December 2013. The bank now has a deadline of the end of 2017, a date which it expects to beat by at least 12 months. More than 4,000 staff are working full-time on carving out Williams and Glyn, and the project is expected to cost around £1.5bn – meaning RBS will not make any money selling the unit. Those staff are cloning RBS’ IT systems and infrastructure to make sure Williams and Glyn will not have to rely on its former parent when it floats off as a new bank, in contrast to Lloyds’ spin-off TSB which chose to continue using Lloyds’ systems. Although Williams and Glyn is designed to operate as an independent business, insiders believe there is a strong chance it could be bought out by another player in the industry in its first few years after floating. Spain’s Banco Sabadell is one possible contender. It snapped up TSB this year within 12 months of the bank floating on the stock market. Sabadell and TSB have made no secret of their ambition to grow further potentially with acquisitions and particularly focusing on business banking. TSB is heavily focused on serving individuals, while Williams and Glyn is being launched with more than 200,000 small business customers alongside 1.4m retail customers. Other challenger banks also anticipate consolidation in the sector in coming years. However, they do face a competitive hurdle which could put them at a disadvantage to the larger banks in any bid for Williams and Glyn, a point which the challenger banks raised in a meeting this summer with the Competition and Markets Authority. “A smaller bank using the standardised model for SMEs would have had to set aside twice as much capital than a larger incumbent bank on the internal risk weighting if it were to acquire the Williams & Glyn assets,” the banks said, according to the minutes of that meeting. Follow the Telegraph on LinkedIn. Share this article with your network.
It appears that the Royal Bank of Scotland ( Scotland ) is preparing to sell off its Jones & Glyn business with the hiring of Bank of America Merrill Lynch to prepare the sale . It was authorised to sell the company by European regulators as a part of its £ 46bn bailout ; however , the sale process has been costly and hampered by setbacks , primarily due to technology issues . It is estimated that RBS values the bank at £ 1.5bn ( $ 1 ) .