Part of the exclusive private bank used by Her Majesty the Queen could be sold off to raise funds for its owner, the Royal Bank of Scotland.
RBS yesterday confirmed it was considering selling the international arm of Coutts, a deal one source said could net the bank as much as £600million.
It is though the bank, still 80% owned by the UK government, is being pressured to focus more on domestic lending.
The move means that Coutts, founded in the 18th century and best known as banker to the Queen, could be split into two businesses – one based in Britain and one in Zurich from where it runs operations in Hong Kong, Singapore, Abu Dhabi and Dubai that manage nearly £21.5billion in client assets.
RBS has attracted a variety of offers from a range of bidders including unnamed Asian and North American parties for Coutts International, two sources with knowledge of the operation said.
The sale could net RBS between £430million and £650million, based on a multiple of 2 to 3% of assets under management, said a third person with knowledge of the matter.
The bank told staff on Monday that it was exploring a sale.
“We will…work with local management teams to explore options including merging the remainder of the current Coutts International business, considering joint ventures or a sale, thereby reducing RBS’s footprint internationally,” RBS executives Alison Rose and Les Matheson wrote in a memorandum.
The UK owns a majority of the bank since the £45 billion rescue operation post-financial crisis and is now under pressure to focus on loans to UK households and businesses and help support the country’s economic recovery.
It has undergone a major restructuring in order to pay back taxpayers’ funds and eventually return to private ownership, and appeared a step closer to doing both after it posted a surprise £1billion pound quarterly profit recently.
As part of the RBS overhaul, Coutts’ international unit, which employs 1,200 staff, has dramatically cut the number of countries it serves.
Like many Swiss private banks, Coutts International’s prospects have dimmed due to an international crackdown on untaxed assets being held in so-called offshore centres such as Switzerland.
While Coutts isn’t under criminal investigation in the US, it is one of more than a 100 Swiss banks which have come forward to American prosecutors in a tax probe. Swiss banks with reason to believe they may have committed tax offences by helping wealthy Americans evade taxes are eligible for a non-prosecution agreement if they come clean and face fines.
The Coutts unit, which posted a net loss last year due to provisions including for a US tax crackdown, is unlikely to hit a return on equity target of more than 15%, said the memo from RBS, which also referred to “compressed margins and the increasing need for scale in international business”.
Last year, Coutts International’s operating profit stood at £67.7million when stripping out costs to cover the US tax crackdown, close a branch in Berne, Switzerland and for bad loans granted in Asia.