The British government decided to hire an adviser on the potential split of the Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) into a good bank and bad bank. Patrick Jenkins of the Financial Times said that the government would soon announce the appointment of Rothschild Group to evaluate the plan.
Rothschild Group is one of the largest independent financial advisory firms worldwide. People with knowledge about the situation said that Rothschild Group prevailed against competitors Deutsche Bank AG (NYSE:DB) (ETR:DBK), and Bank of America Merrill Lynch in a presentation last week.
Rothschild To Evaluate Split Of RBS
According to the report, Rothschild is expected to start evaluating the planned split of the Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) immediately. Its target is to complete the evaluation on September and to remove uncertainties on the future structure of the bank.
In addition, the Treasury will also appoint a specialist in asset evaluation to examine the loan boon of the Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS). The Financial Times said that Pimco or BlackRock, Inc. (NYSE:BLK) will be appointed to perform the responsibility given its experiences in assessing troubled loans in the European region.
The Governor of the Bank of England, Mervyn King recommended the break-up of the Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS), to restructure the bank in a year and establish a new RBS as a major lender to the economy of the United Kingdom. Institutional investors including Royal London Asset Management and Standard Life Investments opposed the proposed split of the bank saying that it would destroy value for shareholders.
Plan To Separate The Toxic Loans
Last month, Chancellor of the Exchequer, George Osborne promised an urgent investigation regarding the plan to separate the toxic loans of Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) worth as much as $130 billion into a state-controlled bad bank. Osborne also expressed caution that splitting the bank could be disruptive and it might require a complex valuation of assets as well as state-aid approval from Brussels.
The Parliamentary Commission on Banking Standards (PCBS) released its final report indicating that the government needs to implement alternative strategies to ensure the future of the Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) such as breaking up the bank and putting its bad assets in a legal entity.