RBS, through its Dutch subsidiary NWM NV, held an aggregate 40% shareholding in Alawwal bank on behalf of itself, Stichting Administratiekantoor Beheer Financiële Instellingen (“NLFI”) and Banco Santander S.A. (together the “Consortium”) which dated back to RBS’s acquisition of ABN AMRO in 2007. The economic interest of RBS was equivalent to a 15.3% shareholding in Alawwal bank.
As a result of the Merger NWM NV received an aggregate shareholding of 10.8% in SABB, representing the total interests of the Consortium. NWM NV then immediately transferred the RBS economic interest of 4.1% in SABB to NWM Plc, and the balance of the shares separately to NLFI and Banco Santander S.A., as part of an unwind of the Consortium arrangements.
NWM NV is reported as part of RBS’s NatWest Markets franchise. NWM NV is now expected to transfer to NWM Plc ownership during the second half of 2019, subject to regulatory approvals, and will continue to be reported as part of the franchise.
Commenting on the transaction, Ross McEwan, CEO of RBS said,
“We are pleased that this merger has now concluded; it will help facilitate the future exit of our shareholding as we continue to focus on our key target markets. The release of capital will also have a positive and material financial impact for RBS.”
Impact of the Merger on RBS
• Within the NatWest Markets franchise, RBS will recognise an income gain on disposal of the Alawwal bank stake for shares received in SABB of £0.4 billion and a reduction in risk weighted assets (“RWAs”) of £4.7 billion.
• Within Central Items, RBS will recycle foreign exchange of £0.3 billion which is capital neutral and will in addition extinguish legacy liabilities of £0.3 billion.
• The gains above the line will be partially offset by £0.3 billion of non-controlling interests.
• These impacts would have increased the 31 March 2019 CET1 by 60bps, being 20bps attributable profit and 40bps RWA relief.
The profit and loss impacts on franchises are summarised in Table 1 below, with affected entities noted.