ROYAL Bank of Scotland is in talks to offload a division that sells sophisticated products like equity derivatives to investors to BNP Paribas as part of its plans to slim down its investment banking operations.
The Edinburgh-based giant confirmed it is in talks with a third party about the sale of the structured retail investor products and equity derivatives business, which it had said in June it planned to exit.
The part-nationalised bank gave no more details about the sale, stressing there is no certainty an arrangement will be reached. However, BNP Paribas is believed to have beaten off competion from rivals to put itself in pole position to complete a deal.
The acquisition would give it control of a business that has sold around 60,000 products including derivatives to a client base that includes many high net worth individuals and independent financial advisers.
Investors can use derivatives to bet on and hedge against movements in share prices and indices.
Most of RBS's business in this area is run from London.
While the division represents a relatively small part of Royal Bank's investment banking operation, the sale of the unit would help in directors' attempts to free up capital and to simplify the bank.
Earlier this month new chief executive Ross McEwan underlined his desire to see RBS focus on its core retail and business banking operations.
The group announced plans to transfer £38 billion of toxic assets into a new division within the organisation rather than spinning them off into a so called "bad bank" as some politicians wanted.
The division will try to speed up the disposal of the assets. These include around £13bn loans linked to commercial property and £10bn advances made by Ulster Bank.
Last week RBS confirmed shipping loans will be included in the internal "bad bank". A report said RBS will put $4b to $5bn (£2.5bn to £3.1bn) of shipping loans in the division.
RBS, which is 81% owned by taxpayers, warned the creation of the internal bad bank would lead to increased impairment charges of up to £4.5bn in the coming three months.
Revealing the first stage of his overhaul of the organisation Mr McEwan said he wanted RBS to be the biggest and best bank in the small and medium sized enterprise market.
In the group's third quarter results announcement, RBS also confirmed that it planned to speed up the flotation of its US bank Citizens.
The first shares will be offered for sale next year and the sell-off completed by the end of 2016.
The outcome of Mr McEwan's full strategic review of the bank is due in February.
UK Financial Investments, which manages the Government's stakes in banks, has said the results will be a crucial part of the investment case for the reprivatisation of RBS.
George Osborne said recently that he thought a sale of RBS shares was unlikely before the general election, in 2015.
RBS said yesterday: "RBS previously announced that it planned to exit its structured retail investor products and equity derivatives business. RBS continues to make progress with its sale of the IP&ED business and is in discussions with a third party in connection with such sale. No agreement has been entered into and there is no certainty that an agreement will be reached."
BNP Paribas showed its enthusiasm for the industry last month when it took over a €12.5bn (£10.5bn) equity derivatives managed by Credit Agricole.
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