RBS courts investors ahead of possible branch sale

LONDON, March 11 Mon Mar 11, 2013 1:45pm EDT

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LONDON, March 11 (Reuters) - Royal Bank of Scotland is sounding out some of Britain's biggest investment firms on their appetite for a stock market listing of the bank's small business lending arm, investor sources close to the talks said.

The state-backed bank is considering options for these branches because European competition authorities have ordered RBS to sell them as a consequence of a 45.5 billion pound ($67.80 billion) bailout by the British government during the 2008 financial crisis.

The talks on Monday are effectively a pre-sale dialogue between prospective shareholders and RBS.

Former Tesco director Andrew Higginson, tipped to run the business after its spin-off, is hosting the meeting to find out the type of bank these asset management firms are prepared to put their investors' cash into, the sources said.

"If you can make a clear case of what you feel constitutes a good business - the loans you're happy to remain on the books and what needs to be hived off - it means that you will get a business that you genuinely like," said one source.

The source spoke on condition of anonymity and declined to identify other investment managers taking part because of the sensitivity of the situation.

RBS declined to comment.

The new business, which would revive the British banking brand of Williams & Glyn's, will be composed of 315 branches.

A plan to sell these branches to Spain's Banco Santander fell through in October.

RBS chief executive Stephen Hester said last month that a lack of buyers for UK bank assets meant a stock market sale of the business was now RBS's "baseline" plan. The bank has said it expected to ask for an extension to an end-2013 deadline to sell the branches.

One head of equities at a large British fund manager who has attended earlier meetings about a stock market listing of the branches said the quality of assets, the valuation under discussion and the proposed management structure, were all spurring potential interest.

"We don't get too excited one way or another on these things because so many have slipped up ... but there's a chance this time so we'll have a proper look at it," the investor said.

Rising equity markets across Europe have spurred a revival in new stock market listings this year reflecting renewed appetite for new shares among fund managers.

British insurer esure and estate agent Countrywide Holdings are both pursuing listings while house builder Crest Nicholson returned to the stock market in February.