By Sinead Cruise and Steve Slater
LONDON (Reuters) - Royal Bank of Scotland (RBS) (L:RBS) may ditch plans to float its Williams & Glyn business after attracting interest from buyers looking to own a slice of Britain's rebounding bank sector.
Taxpayer-backed RBS said on Wednesday it would consider the sale of the 300-strong branch network after receiving a number of informal approaches for the unit, while also preparing it for a possible flotation in the first quarter of 2017.
Williams & Glyn could be valued at about 1.5 billion pounds, which analysts estimate is its book value. RBS, 73 percent owned by the British government, was ordered to sell the network by European competition authorities as a cost for being bailed out by the taxpayer in 2008.
The launch of a formal sale process follows a flurry of international interest in Britain's so-called "challenger" lenders, following the takeover of TSB by Spain's Sabadell (MC:SABE) earlier this year.
After buying the TSB branches, Sabadell chief Jaime Guardiola said there was room for further consolidation among mid-sized UK lenders and his bank was "in a position to grow."
RBS did not name the possible bidders, but they could also include Spain's Santander (MC:SAN), which already owns one of the biggest UK retail banks and was close to buying the RBS branches three years ago, and Clydesdale, the UK retail bank set to be demerged by parent National Australia Bank (AX:NAB) in February, industry sources and analysts said.
A spokesman for Santander said the lender did not comment on market speculation but pointed to a speech by Chairwoman Ana Botin at a recent investor day in which she said Santander would "continue to analyse opportunities" in its core 10 markets, which include the UK.
Virgin Money (L:VM) and Spain's BBVA (MC:BBVA) were also interested in buying the branch network before and could have another look, industry sources said.
Clydesdale, Sabadell, BBVA and Virgin either declined comment or were not immediately available for comment.
PROSPECTIVE CHALLENGER
Williams & Glyn has 1.8 million customers, net loans and advances of 20 billion pounds and customer deposits of 24 billion pounds, making it one of Britain's largest prospective challengers with potential to poach market share in the small business lending sector from Lloyds (L:LLOY) and RBS.
RBS has said Williams & Glyn made a 369 million pound profit in the first nine months of this year, on income of 625 million.
RBS said it remained committed to a sale of Williams & Glyn before the end of 2017, under the terms of its 46 billion pound bailout at the peak of the 2007/2008 financial crisis. It said it had hired Bank of America Merrill Lynch (N:BAC) in September to prepare the spin-off.
RBS submitted an application for a banking licence for the separate business in October, which ran to more than 16,000 pages of information about strategy, risk and governance frameworks.
RBS raised 600 million pounds in 2013 from a group headed by private equity firms Corsair Capital and Centerbridge Partners for a stake of up to 49 percent in Williams & Glyn. (http://uk.reuters.com/article/rbs-branches-corsair-idUKL5N0HN2D120130927)
Williams & Glyn's origins date back to 1753, but the name has been dormant for almost 30 years. Separating the business has been costly and complex, beset by problems separating the technology platform. RBS said in July it expected the separation to cost it about 1.1 billion pounds.