RBS says SABB-Alawwal bank merger to boost its core capital

The completion of a merger between Alawwal bank and Saudi British Bank (SABB) would lead to Royal Bank of Scotland (RBS) shedding $5.9 billion of risk weighted assets and boost its core capital.

RBS, through Dutch subsidiary NatWest Markets N.V., was part of a consortium including NLFI and Banco Santander S.A. that held an aggregate 40 percent equity stake in Alawwal bank, the British bank said in a statement.

RBS also had an interest equivalent to a 15.3 percent stake in Alawwal bank.

“As a result of the merger completion, we will recognize an income gain on disposal of the Alawwal bank stake for shares received in SABB of GBP 400 millionand a reduction in risk weighted assets of GBP 4.7 billion,” the statement said.

RBS also said the deal would extinguish legacy liabilities of GBP 300 million.

The changes would increase the bank's CET1 core capital ratio by 60 basis points, it said.

The merger will also help RBS to focus on its target markets, RBS chief executive Ross McEwan said in a statement.

RBS, which was rescued in 2008 with a GBP 45.5 billion capital injection by the British government, has been shrinking its overseas operations since the financial crisis to focus on its UK lending operations.