Virgin Money Holdings may buy RBS branches

RICHARD BRANSON’S Virgin Money Holdings (UK) Ltd. approached Royal Bank of Scotland Group to buy 316 branches and US investor JC Flowers is considering a bid, according to three people with knowledge of the matter.

The discussions come after Banco Santander SA, Spains biggest bank, abandoned its £1.7 billion ($2.7 billion) purchase of the branches last week, citing completion delays. The new plans are at a very early stage and no decision on whether to table a formal offer has been made, said the people who asked not to be identified because the talks are private.

RBS has to sell the outlets by 2014 to comply with a European Union state-aid ruling after receiving 45.5 billion pounds in the biggest banking bailout in the world in 2008 and 2009. RBS, Britains biggest government-owned bank, may approach the European Commission and seek an extension to the deadline, one of the people said.

Bid Unlikely NBNK Investments Plc, a company created to acquire financial assets, is unlikely to bid for the outlets as the firm is being wound down and reversing that process would be difficult, said a separate person with knowledge of the companys plans. Officials at Virgin Money, NBNK, JC Flowers and RBS declined to comment. Regulators may now be a lot more flexible with the branch sale deadline because Britains consumer-banking market has become more competitive, RBS chairman Philip Hampton said.

“RBS will commence a new process of disposal following discussion with the EC and will provide a further update on this in due course,” chief executive Stephen Hester said in a statement today. RBS fell 1 per cent to 268.1 pence in London trading.

The stock has climbed 33 per cent this year. Santander gained 1.2 per cent to €5.81. “Severe Regime” Virgin Money agreed to buy part of Northern Rock in November for £747 million and move its headquarters to Newcastle, England, the mortgage lender’s base. JC Flowers and NBNK also submitted bids for the bank, which the UK government took over in February 2008. RBS’s Hampton said the bank might try to see if the European Commission will let it keep the branches. – (Bloomberg)