Royal Bank of Scotland Exercises Option to Buy 49% of RBS Advanta Joint Venture

Strategic Insights -

The Royal Bank of Scotland has exercised its right to purchase 49% of its RBS Advanta credit card joint venture from Fleet Financial Group, a move that will solidify its majority stake in the business. The transaction, expected to complete in the near future, is a result of the recent sale of Advanta's credit card business to Fleet Financial, which triggered an option for Royal Bank to buy out Advanta's stake. RBS Advanta has experienced rapid growth, with over 700,000 cards in issue and balances of $700 million, compared to 360,000 cards and $300 million a year ago.

Key Takeaways:

  • Royal Bank of Scotland exercises option to purchase 49% of RBS Advanta joint venture from Fleet Financial Group.
  • The transaction is a result of Advanta's recent sale of its credit card business to Fleet Financial.
  • RBS Advanta has experienced significant growth, with over 700,000 cards in issue and balances of $700 million.
  • The business has net assets of about $25 million as of September 1997.
  • RBS Advanta has been one of the fastest growing credit card businesses in the UK.
  • American credit card issuers have reduced the cost of credit, putting pressure on established UK card issuers.
  • Interest rates have fallen from over 20% to 15% in some cases.
  • RBS Advanta was launched in February 1996 as a joint venture between Royal Bank and Advanta Corporation.

Statistics:

  • RBS Advanta has over 700,000 cards in issue compared to 360,000 a year ago.
  • Balances of $700 million compared to $300 million a year ago.
  • Net assets of about $25 million as of September 1997.
  • 51% stake held by the Royal Bank of Scotland, with the remaining 49% to be bought out.
  • Advanta Corporation's expertise in database marketing was used to establish RBS Advanta.
  • RBS Advanta has been operational since February 1996.

Sources:

  • LOUISE NEVILL, Royal Bank of Scotland, "Royal Bank of Scotland Exercises Option to Buy 49% of RBS Advanta Joint Venture" (no date provided).
  • Royal Bank of Scotland, Statement on RBS Advanta Credit Card Joint Venture (no date provided).
  • "RBS Advanta Credit Card Venture Sold to Fleet Financial" (Source not explicitly stated, but implied to be part of the original text).