RBS will maintain its global reach despite losing more than 300 branches in England and having to sell off its insurance business, the bank’s executives claimed yeterday.

The bank confirmed that it was selling its insurance business — which employs 1,600 in Scotland — plus six Scottish Natwest branches, while Lloyds is to sell the Trustee Savings Bank (TSB) brand plus 185 of its branches.

With the sale of all of RBS’s 312 branches in England also demanded by the EU’s competition rules, the bank is losing a substantial slice of its business and will emerge from the financial crisis much reduced in size.

However, a spokesman for the bank said: “We will still be headquartered at Gogarburn in Edinburgh and we will still have a global presence.”

The sales, which are not likely to happen for a couple of years, plus the trimming of staff in bank branches announced earlier this week will reduce the bank’s workforce in Scotland from 16,500 to about 14,500, less of a reduction than was feared when the bank crisis began.

In talks with EU competition commissioners, chief executive Stephen Hester fought off demands that RBS should sell its Citizens Bank subsidiary, which is the eighth largest bank in the US measured by deposits.

The retention of Citizens, plus the continuation of the bank’s global markets division, albeit on a slimmed down basis, means that it will still be a significant international bank.

But a balance sheet, which pre-crisis contained more than £2,000 billion of assets and made it the world’s biggest bank, will be drastically trimmed back towards £1,000 billion. Bank sources said that the days when, under Sir Fred Goodwin, it aimed to be the world’s biggest bank were now firmly in the past.

Mr Hester said yesterday that the complexity of the sales, which involve selling insurance companies with revenues of £4.5 billion, will absorb a lot of management time and make it more difficult to achieve his objective of restoring the bank to standalone health, getting rid of the government shareholding, within four years.

However he said that the bank was l committed to increasing lending to homebuyers and businesses, although businesses were paying off old loans as fast as the bank was making new ones.

The sale of RBS’s Scottish Natwest branches will have little effect on competition within the banking market.

However the sale of 185 Lloyds’ TSB branches, which have mortgages of about £6.3 billion and retail savings of about £4.5 billion, is more of a boost for competition.

In effect, at the end of the process, Lloyds will have swapped the TSB bank it bought in 1995 for the HBOS bank it acquired earlier this year.

Since Lloyds TSB Scotland had between 10 and 12 per cent of the Scottish market, the sale should create a fourth bank to compete with RBS, Lloyds (which will operate under the Bank of Scotland name), and the Clydesdale.

A sale of Lloyds TSB Scotland to a bank not currently involved in the market seems the likeliest prospect just now. Such are the regulatory and financial constraints now on operating a bank, that prospects of a new independent Scottish-owned institution seem remote.

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