THE carve-up of Royal Bank of Scotland and Lloyds has taken different turns that has left both of them considerably weakened and raised questions about whether the final outcome will actually benefit anyone.
But while their long-term prospects remain uncertain, selling off their various assets may prove to be easier than first thought.
RBS chief executive Stephen Hester told me last week that he had already received approaches and that some deals coul
d be completed within 18 months.
There is a bitter-sweet element to this. While RBS is legally bound to run these businesses normally, it will not want to hang onto anything that will be seen as a lame-duck division.
Given the choice, Hester would prefer to retain the insurance businesses. They produce good profits and are excellent brands. Everybody has heard of Direct Line, Churchill, Green Flag and Privilege. It would cost millions for anyone to create a brand to compete with them. That is why Hester did not want to sell them cheaply and pulled them off the market earlier this year. Now that he has been told they must go, he is talking of a flotation, an exit route suggested in The Scotsman last week, that should satisfy all concerned, including the taxpayer.
He has also got to let go of the England and Wales branches of RBS, the 318 that originally traded as Williams & Glyn's. He's much less fussed about these. Or so he says. RBS still has a strong presence south of the Border through its NatWest network, but selling the former W&G branches will see the RBS name become that much less visible. For a company that harboured ambitions of global domination the disappearance of its brand in England will be hard to swallow.
But it will surely be an easy business to sell and appointing Alan Dickinson, one of the bank's senior figures, to oversee the sale looks like an attempt to show that this is a valued operation that will command a premium price.
So who will buy? Tesco is looking like a less likely candidate. Benny Higgins, chief executive of Tesco Bank, has said he is not that interested in any of the assets being offloaded.
Let's face it, if Higgins can tap in to a nationwide chain of supermarkets that already reaches one in three grocery shoppers why would he need a high street presence, with all its associate costs? All he needs to do is put a branch of the bank in the corner of every Tesco store.
A more likely buyer is Virgin Money, whose founder Sir Richard Branson has declared an interest, or an overseas bank. Spain's Santander is probably a little over-represented through Abbey, Bradford & Bingley and Alliance & Leicester, so looks to be out of the running. Rival Spanish bank BBVA has been knocking on the UK door for years without making a move. HSBC may be seen as too dominant already in UK banking.
That leaves National Australia Bank, owner of Clydesdale and Yorkshire banks, which are minnows in the UK sector, as the most likely buyer. Like BBVA, it has long held ambitions to expand in Britain, having been linked in the past with Abbey and numerous others.
If Hester has had a week he would rather forget, then Eric Daniels, his counterpart at Lloyds Banking Group, has pulled off a remarkable escape. The markets were well-disposed towards Lloyds which emerged from the talks with the Treasury and the European Commission much less scarred than its rival.
After all that talk of selling Scottish Widows – which prompted a flurry of headlines – and Halifax, another red herring, Daniels and his board must have been quietly delighted to have got off so lightly.
Selling the old TSB branches in Scotland, when the bank would have offloaded branches north of the Border anyway, was hardly a punishment. It had tried to shut down the Cheltenham & Gloucester branches until someone in Brussels said they could make some money by selling them instead. Intelligent Finance? It was already closed to new business.
There is a suspicion that Lloyds was excused the big break-up because Downing Street and the Treasury had married it to HBOS in the first place and, having waived competition rules to allow them to come together, it would have been too embarrassing to then force them apart.
The end result of this is that RBS and Lloyds have been weakened and left vulnerable to foreign buyers and, in four of five years' time, we may have a banking industry that we can no longer call our own.
Some will argue that it is just deserts for poor management decisions. But it will be a high price to pay.
