RBS Abandons Plan to Spin Off Williams & Glyn Amid £2 Billion Losses So Far in 2016

RBS Abandons Plan to Spin Off Williams & Glyn Amid £2 Billion Losses So Far in 2016

The Royal Bank of Scotland (RBS) has spent the past few years planning to revive its Williams & Glyn (W&G) subsidiary. Overall, the Edinburgh-based bank spent some £1.4 billion on an IT system for W&G, according to the Financial Times, including a €300 million contract awarded to IBM and a branch of Infosys in 2013. The goal was to revamp the IT platform and relaunch a bank that has been dormant for decades with its own IPO.

But with the IT challenges proving too great and a rougher climate for the banking niche W&G was intended to fill, RBS has announced that it is abandoning its plan. Instead, the embroiled Scottish bank will try to sell it off. The most likely candidate so far appears to be Santander UK, which had shown interest in buying the subsidiary in the past before talks broke down due to concerns about W&G’s technology platform.

“Due to the complexities of W&G’s separation, whilst good progress has been made on the program to create a cloned banking platform, the board concluded that the risks and costs inherent in the program are such that it would not be prudent to continue with this program,” said RBS in a statement.

The bank had been touting its plans to relaunch W&G for years. On the RBS website, the company spoke in glowing terms about its subsidiary’s history and its goal of “bringing local values back.” It said that, “the new Williams & Glyn will build on this heritage when it returns to the UK high street in 2017 — offering a superior level of service whilst putting our customers and colleagues back at the heart of banking.”

The W&G fiasco is more bad news for a bank that has been losing money year after year since receiving a massive taxpayer bailout during the 2008 financial crisis. It is only part of the larger issues that led to a £2 billion loss for RBS during the first half of 2016 — a huge drop from the already-disappointing £179 million loss it posted in the first six months of 2015.

On top of the W&G blunder, legacy issues related to payment protection insurance sales and a rights issue dating back to 2008 have been blamed for the damage. While inappropriate payment protection insurance sales have been an industry-wide concern — leading to some £24 billion in losses for U.K. banks, according to the BBC — RBS had to reserve £1.3 billion to cover its legacy issues in the second quarter alone. This underpinned quarterly results that were multiple times worse than the £247 million loss predicted by analysts, per the Financial Times.

RBS’ top executive Ross McEwan said that such hard times, while unfortunate, represent “good progress” on the bank getting beyond its legacy problems. He noted that it is about half-way through a five-year plan that, according to the bank, will lead to better days in the future.

“The core thing for me is that we’ve got a very strong bank here that can take these shocks,” RBS top executive Ross McEwan told the BBC.

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