Blackstone, Wellcome Out Of Race For RBS Branches

A consortium of Blackstone Group (BX) and U.K. charity Wellcome Trust has left the race for Royal Bank of Scotland Group PLC's (RBS) 318 U.K. branches because the bid wasn't competitive enough, a person familiar with the situation said Monday.

A final shortlist for the branches, currently valued at up to GBP2 billion, is expected by the end of this week. Spain's Banco Santander SA (STD) and Banco Bilbao Vizcaya Argentaria SA (BBVA), National Australia Bank Ltd. (NAB.AU) and Richard Branson's privately held Virgin Money are still in the race, the person added.

Once a final group is picked, due diligence on the assets will begin, for a period of about six weeks.

A deal is expected in the second half of the year, although the actual transfer of operations probably won't take place until 2011.

RBS, 83%-government owned, is selling branches in England and Wales, along with NatWest branches in Scotland, and the accounts of some SME customers across the U.K., under European Union requirements.

Combined, the branches have GBP23.6 billion in assets and 6,000 employees.

The bank received the largest state aid in the world following its near collapse during the financial crisis in 2008. The EU has ordered it to cut market shares in some segments to make sure the bank isn't at a competitive advantage to peers that stayed independent.

-By Patricia Kowsmann, Dow Jones Newswires. Tel +44(0)207-842-9295, patricia.kowsmann@dowjones.com

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