RBS likely to miss 2017 deadline for Williams & Glyn sale

Royal Bank of Scotland has warned that it is likely to miss the 2017 deadline to spin off its Williams & Glyn subsidiary, laying the bank open to a "significantly greater" financial impact than hoped, including further delaying the resumption of dividends.

RBS, which is being forced by the European Commission to sell the unit as a condition of its 2008 state bailout, said it felt there was now a "significant risk" that the separation and divestment will not be achieved by the 31 December 2017 deadline.

The 73% state-owned bank said this conclusion was reached after "extensive analysis" on the separation and divestment process it had conducted since the release of its final results in February.

"Due to the complexities of Williams & Glyn's customer and product mix, the programme to create a cloned banking platform continues to be very challenging and the timetable to achieve separation is uncertain," RBS said, the day before it will release first-quarter results for the new financial year.

Directors are "exploring alternative means" to achieve separation and divestment, it added, but either way they warned the "overall financial impact on RBS is now likely to be significantly greater than previously estimated".

The bank has emphasised before how the process is diverting group resources away from other key areas, with separation costs totalling £630m in 2015.

In February the FTSE 100 company pushed back the expected date for the separation of Williams & Glyn to "after Q1 2017" and admitted it faced "significant challenges and risks" from the process, "some of which may only emerge as various separation process phases are progressed".

Management maintained the challenges in separating Williams & Glyn were one of the main reasons why dividends will not resume before the first quarter of 2017.

Last year, chief executive Ross McEwan said, as well as continuing preparations for an initial public offering, a trade sale process was being planned for Williams & Glyn in the first half of 2016 after a number of informal approaches for the business.

Interested parties have been said to include Virgin Money, Santander and Secure Trust, which is led by ex-RBS executive Paul Lynam.