STEPHEN Hester, the incoming chief executive of Royal Bank of Scotland, has raised further doubts about the sale of the group's insurance businesses due to the credit squeeze.
Talks with two parties are ongoing and Hester said a sale is scheduled to complete before year-end results in February.
But the tight financial situation means it is not certain a deal will be reached, he said during a wide-ranging interview wi
th Scotland on Sunday.
Swiss Re, the world's largest reinsurance company, has joined with private equity group CVC in a bid for the Direct Line and Churchill Insurance businesses in a deal that is expected to value the operations at £6bn.
The bid is being led by RBS's former finance director Fred Watt, who left the bank three years ago and joined CVC last year.
Sources said CVC-Swiss Re will pay £3bn for a 51% stake in RBS's insurance business, which also includes Privilege, Green Flag, UKI Partnerships and NIG. When news emerged of their interest in late October, CVC was given up to six weeks to complete the transaction.
But Hester indicated that this process has been delayed by fundraising issues and the capital now being raised by the bank, underwritten by the Government, means there is less pressure to sell assets.
"The sale process will be brought to a conclusion by the year-end results in February. There are a couple of interested parties," said Hester. "But the economic environment means it is difficult for people to raise money. There can be no certainty as to whether we will sell the businesses.
"I don't want to sell them unless the price is right, and one of the benefits of our equity raising is that we have a large cushion of capital which allows us to make the right decision on disposals."
RBS put its insurance business up for sale six months ago when it announced plans to raise £12bn from shareholders to bolster its core capital. It now requires another £20bn and it hopes to raise some of this from existing shareholders.
Chief executive Sir Fred Goodwin and chairman Sir Tom McKillop will step down. Goodwin had also indicated that he would only sell the insurance business if he got the right price. It was thought he wanted nearer £7bn.
RBS is the second-largest general insurer in the UK, with 18,000 staff, and the UK's largest insurer of cars. It has a big market in travel, home and pet insurance.
CVC is believed to be providing most of the capital to fund the deal, with Swiss Re underwriting the risk.
The US insurer Allstate had been regarded as a potential buyer of the whole business, rather than a majority stake.
While uncertainty hangs over the insurance business, Hester is committed to a strategic review of all the group's operations and asset sales are expected.
During the interview he said there was "all sorts of corridor gossip" about sales but there had been no "formal" approaches for any parts of the business.
He said he had "no idea" on job losses, though he admitted there would be cutbacks across the group if appropriate.
The full article contains 537 words and appears in Scotland On Sunday newspaper.
