New regulations that will effectively break up Britain’s biggest lenders from 2019 have prompted Royal Bank of Scotland (RBS) to hoist a “for sale” sign above the Channel Islands operations of Lombard, the asset finance group.
Sky News has learnt that RBS has asked KPMG, the professional services firm, to launch an auction of Lombard’s offshore business which bankers believe could fetch in the region of £200m.
The sale process, which kicked off several weeks ago, follows RBS’s decision to close the Lombard unit in Gibraltar, Guernsey and Jersey to new business.
Sources said that the inability to house Lombard Finance’s offshore balance sheet within RBS’s ring-fenced bank had led management to conclude that the business should be sold.
“It doesn’t work having this in NatWest Markets (RBS’s non-ring-fenced bank) either,” said one source on Tuesday.
Analysts speculated that the likes of Investec and Secure Trust Bank were likely to take a look at the Lombard unit.
Lombard Finance is one of Britain’s biggest asset finance providers, lending £6bn in 2015 against assets such as vehicles, manufacturing plant and technology.
The auction of its offshore unit is one of the first tangible examples of a major British bank deciding to sell a substantial business because of the ring-fencing rules which will create a firewall between lenders’ retail and investment banking units from 2019.
The reforms were conceived in 2011 by a commission led by Sir John Vickers, and have cost the five major banks – Barclays, HSBC, Lloyds Banking Group, RBS and Santander UK – billions of pounds to implement.
Ring-fencing is intended to protect taxpayers during a future financial crisis by enabling the investment banking divisions of major lenders to fail without needing state support.
For RBS, which remains more than 70%-owned by British taxpayers nearly a decade after it was bailed out, the sale of the Lombard offshore unit will represent another streamlining move.
Last week, the bank confirmed a report on Sky News that it was selling its stake in Euroclear, the financial markets infrastructure group, to the owner of the New York Stock Exchange.
Executives within RBS’s Capital Resolution unit, the division which has been responsible since 2014 for dealing with £28bn of legacy assets, oversaw the disposal.
It was the latest in a lengthy tail of assets disposed of by the bank since it was rescued by taxpayers in 2008.
RBS was forced to dispose of Worldpay, the payments processing business, for what critics have since dubbed a bargain basement price.
Its US bank, Citizens, a stake in Bank of China and a big commodities trading operation are also among the profitable assets it was obliged to offload, either for state aid reasons or because its parlous finances required it.
RBS declined to comment on Tuesday.