RBS shares down 3% on FTSE 100 as branch sale could be postponed

RBS is required by the EU to sell the branches by 2013 after receiving substantial amounts of funding from the British government during the financial crisis.

The leading candidate to buy the branches is Spanish bank Santander, which emerged as the big winner from the financial crisis and already owns Abbey National, Alliance & Leicester and Bradford & Bingley in Britain.

However sources close to the matter told Reuters that if bidders were unable to put forward a high enough price by RBS’s deadline of around Easter then the bank may postpone the sale until next year.

Most of the branches on sale are focused on business banking and, while they possess assets of around £24 billion, still managed to make an operating loss last year thanks to impairments affecting small business lending.

The expected sale price for the branches is around one billion pounds. However potential bidders would also find themselves having to re-finance three billion pounds of support, currently coming from the Bank of England.

As well as Santander, other possible suitors include Virgin, National Australia Bank and Spain’s second biggest lender, BBVA.

By 11:27 shares in RBS were down 3.48 per cent to 38.10 pence per share.