Royal Bank of Scotland is poised to sell its WorldPay arm to private equity firms Advent International and Bain Capital, the latest step in its restructuring plan after a humiliating taxpayer bailout in 2008.
Advent and Bain have been in exclusive talks to buy payment processing company WorldPay since late July, a person familiar with the matter told Reuters last month, and the deal could fetch RBS some 2.5 billion pounds ($4 billion).
New Chief Executive Stephen Hester has embarked on a wide-ranging asset sale program after RBS, 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, RBS sealed the sale of over 300 UK branches to Spanish rival Santander for 1.65 billion pounds.
Sources working on the WorldPay deal said, on condition of anonymity, that they expected a formal statement confirming the transaction later on Friday.
Asked about the situation concerning WorldPay, Hester said on Friday that he expected to provide further news during the day about disposals, but did not mention WorldPay by name.
RBS shares were up around 2 percent in early trade, outperforming a 0.8 percent gain in the DJ Stoxx European banking index and a 0.5 percent increase in Britain's blue-chip FTSE 100 index.
RBS is on track for the demanding rebuilding and restructuring targets for our recovery plan, Chief Executive Stephen Hester told reporters on a conference call.
FEWER BAD DEBTS
RBS posted an operating profit of 869 million pounds ($1.38 billion) for the quarter ending June 30, compared to its first quarter operating profit of 713 million pounds.
A healthier loan book boosted its earnings, echoing a pattern set by rivals' results this week.
Europe's top banks, such as HSBC, BNP Paribas and Barclays, all posted bumper profits on the back of lower bad debt charges, although their underlying prospects remain a concern for some investors.
The company's impairment losses fell to 2.49 billion pounds from 2.68 billion in the first quarter, reflecting a strengthening of the global economy.
Excluding gains on the value of its own debt the operating profit was 250 million pounds, down from the first quarter.
INVESTMENT BANK REVENUES FALL
RBS had to be rescued by the British government in October 2008 after its finances were stretched by its role in the 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 expansive acquisition policy, which included the 1999 takeover of NatWest.
RBS's core retail and commercial banking business posted higher revenues during the quarter, but its GBM investment banking division had a more difficult time, with revenues falling 31 percent from the first quarter.
Adding to potentially negative sentiment, Britain's Financial Services Authority (FSA) regulator launched a probe into sales of a bond fund at RBS' Coutts private bank, which counts Queen Elizabeth II among its clients.
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.
(Additional reporting by Steve Slater and Chris Vellacott; editing by Simon Jessop.)