12-07-2016

Interest in RBS’ Greek shipping unit cools post-Brexit vote – sources

RBS

The Royal Bank of Scotland is facing setbacks over a proposed sale of its Greek ship finance business, with potential suitors backing off, partly due to the British vote to leave the European Union, sources told Reuters.

Britain’s June 23 vote has raised the risk of recession and earnings downgrades that have battered bank shares.

Reuters reported earlier that week that RBS had received bids for its Greek shipping operation. Sources said Credit Suisse and China Merchants were among the suitors.

Banking and finance sources say Brexit has put into doubt any advancement of discussions for now – highlighting the fallout for transactions that had been in the works.

“The deal has unsettled some buyers and obviously there would be a knock-on impact on deals like this one because of Brexit,” one banking source familiar with the matter said.

RBS declined to comment.

Two separate finance sources said Credit Suisse had backed away.

“Interest has definitely cooled and Brexit does not help,” one said. “Capital pressures on European banks are also weighing on such portfolio sales now.”

A third source added: “If you are a Chinese buyer, the whole thing might now appear too scary or complicated.”

China Merchants did not respond to an emailed request for comment. Credit Suisse could not be immediately reached for comment.

The Greek operation was worth about $3 billion although sources in the shipping business said that problems with lending to the industry, much of which is in a deep downturn, would affect the value of what could be recouped via a sale.

The business also includes a branch banking licence as well as about 40 staff, the sources said.

They said there was a question mark over what would happen with the banking licence, once Britain pulls out of the EU, which was adding to considerations by potential suitors.

The British bank, which was rescued with a 46 billion pound ($59.70 billion) government bailout during the financial crisis, had previously been a top lender to the global shipping industry and its Greek office played a pivotal role.

“RBS has to decide whether they want to try and offload this whole business at increasingly distressed prices, which has already been eroded given the non-performing part of the portfolio,” another finance source said.

“If you add Brexit to this mix, it’s another complication. They may be better off to wait although the bank is under pressure to lighten its non-core segments.”

RBS, 73 percent state-owned, is in the midst of a restructuring aimed at returning the bank to profit after eight straight years of losses.

The bank’s total shipping exposure reached 7.1 billion pounds in the first quarter of this year, down from 7.5 billion pounds at the end of last year.

Non-performing loans to the industry – those on which repayments are significantly in arrears – increased to 827 million pounds in the first quarter of this year from 434 million at the end of 2015, RBS said in its quarterly results.

Source: Reuters 

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