Royal Bank of Scotland has clinched the $3 billion sale of a majority stake in its WorldPay arm to a private equity duo, the latest step in its recovery plan following a humiliating taxpayer bailout in 2008.

On the day it posted higher quarterly results, RBS said it would sell an 80 percent stake in its Global Merchant Services business, which runs the WorldPay payment processing company, to Advent International and Bain Capital for an enterprise value of up to 2.03 billion pounds ($3.23 billion).

Advent and Bain have been in exclusive talks to buy WorldPay since late July, and analysts had given a price tag of between 2-2.5 billion pounds for WorldPay.

The private equity companies said they planned to grow the WorldPay business and could make further acquisitions.

RBS Chief Executive Stephen Hester has embarked on a wide-ranging asset sale program after the bank, 83 percent state-owned, was ordered last year by European regulators to sell a string of assets as a price for its state bailout.

Earlier this week, it sealed the sale of over 300 UK branches to Spanish rival Santander for 1.65 billion pounds.

RBS will keep a stake of some 20 percent in WorldPay. The sale will result in a gain of around 850 million pounds and boost its core Tier 1 capital ratio by around 30 basis points.

RBS will get an initial cash payment of 1.7 billion pounds once the transaction is finalized and could get a further 200 million pounds depending on WorldPay's performance.

The sale of Global Merchant Services is another significant milestone in the group's restructuring program, Finance Director Bruce Van Saun said in a statement.

RBS shares closed down 1.7 percent at 51.10 pence, giving the bank a market capitalization of around 29 billion pounds.

The stock has risen around 75 percent since the start of 2010, outperforming a 45 percent gain in rival part-nationalized UK bank Lloyds .


RBS had to be rescued by the British government in October 2008 after its finances were stretched by its shared acquisition of Dutch bank ABN AMRO in 2007.

The bank was propped up with 20 billion pounds of taxpayers' money, causing the eventual resignation of then chief executive Sir Fred Goodwin, who had presided over an aggressive acquisition policy which included the takeover of NatWest.


The WorldPay sale came after RBS had announced earlier in the day a sharp rise in second-quarter profits on the back of a healthier loan book and a rise in its net interest margin, although bad debts in Ireland remained problematic.

Second-quarter operating profit rose 22 percent from the previous quarter to 869 million pounds, as impairment losses fell to 2.49 billion pounds from 2.68 billion, reflecting a recovery in the global economy.

Top European banks including HSBC , BNP Paribas and Barclays , have all posted bumper profits on the back of lower bad debt charges, although their underlying prospects remain a concern for some investors.


For a chart on European banks' half-year earnings click on:

For a graphic on banks' bad debt provisions, click here:



RBS's core retail and commercial banking business posted higher revenues but revenues at its GBM investment banking division fell 31 percent from the first quarter.

The performance on GBM was a little light, but on the plus side, UK retail banking looked good, said Joseph Dickerson, an analyst at London brokerage Execution.

RBS said there had been no investment banking pick-up in July, raising concerns that if a slow May and June continued it would leave many investment banks short of 2010 expectations.

July was broadly consistent with the trends we have seen in the previous two months, Hester said. If clients are uncertain and sit on their hands you make less money in investment banking.

Separately it was revealed on Friday that British regulator the Financial Services Authority (FSA) is undertaking a probe into sales of a bond fund at RBS's Coutts private bank, which counts Queen Elizabeth II among its clients.

($1=.6288 pounds)

(Additional reporting by Steve Slater, Chris Vellacott and Victoria Howley; Editing by Simon Jessop, Greg Mahlich)