A consortium that includes the Church Commissioners has won the competitive bid to buy 314 bank branches from RBS, and plans to build a new ethical retail banking chain that will challenge the existing ‘big four’.
The 308 RBS branches in England and Wales and six NatWest branches in Scotland, purchased for £600m, will be rebranded as Williams & Glyn’s, taking it back to the name the network sported up until 1985.
Tom Joy, the Church Commissioners’ director of investments, said it would be a “good bank” that operates to the highest ethical standards and eschews the practices that has brought the banking industry into disrepute, such as investment banking and proprietary trading.
“It’s going to be banking like it used to be,” he said.
The branches posted an operating profit of £168m in the first half of 2013.
The successful consortium was led by investment company Centerbridge Partners and private equity firm Corsair Capital. The Church Commissioners are the next-biggest investors, with a 10 per cent stake in the £600m deal – this amounts to just over 1 per cent of its total £5.5bn portfolio.
RBS was forced to sell the branches as a condition of receiving a £45bn government bailout at the height of the financial downturn. Santander UK was set to buy the branches for an estimated £1.65bn, but the deal fell through a year ago.
The new bank will focus on serving individuals and small and medium-sized enterprises. Joy said it was too early to say if it would also target charity customers.
“Obviously we will welcome charity accounts but I can’t say whether we will focus on charities specifically,” he said. “The next step is to separate the branches from RBS, which is no mean feat, though easier than integrating with another bank.”
He added that the long-term intention was to grow the Williams & Glyn branch network. “We think a good bank will be a profitable bank.”
Not a social investment
Joy told civilsociety.co.uk that while the Church Commissioners regarded the deal as a win/win in terms of helping to further the Church’s mission while also providing it with income, it did not label it as a social investment.
“Social investments, or impact investments as they are sometimes called, are characterised as investments made by charities or equivalent organisations where they are willing to sacrifice some level of return in order to invest directly in their mission.
“But for the Church, this was first and foremost a financial investment, and if this deal had failed in terms of meeting our risk/return hurdles, we would not have moved forward with it.
“We were attracted to it from the aspect of a desire to create a good bank, so we viewed it as a win/win, but we can’t categorise it as a social investment.”
He said the Church Commissioners had not yet dipped its toe into the arena of impact investing, “though we continue to look at it”.
“It’s easier for some charities where they can directly invest in their mission. For the Church it is harder to do that. So what we have done is focus on generating good investment returns and use those to maximise the distribution to the Church. Then the Church decides how to spend it. Over the last 20 years we’ve had a pretty good track record of doing that.”
