RBS Jilted as Santander Rejects Branch Deal

Royal Bank of Scotland Group Plc was left standing at the deal altar late Friday after Spain’s Banco Santander abruptly pulled the plug on the deal after winning an auction to buy 316 RBS branches. The surprise turn of events could mean that RBS will need more time than its current deadline to find an alternate buyer—or that regulators might need to revise their requirement for RBS to sell.

Bloomberg reported Monday that the deal, which would have cost Santander some 1.7 billion pounds ($2.7 billion), was originally supposed to be completed by mid-2014, already past the original deadline of 2013. Santander had agreed to buy the branches in 2010, and has been trying to raise capital since then.

“One of the reasons why Santander may have abandoned this deal is because overall profit expectations for banks in the U.K. aren’t as great as the market had forecast because of regulatory pressure,” said Inigo Lecubarri in the report. Lecubarri, who helps manage about $400 million at Abaco Financials Fund in London, continued, “Additionally, banks are being requested to boost their capital all around the world, and Santander may find some savings by pulling out of this deal at a very little cost.”