RBS warns Scottish rebels

Royal Bank of Scotland has called Scotland home for almost 300 years, but has finally confirmed that it will move south of the border if Scots vote next week to split with the rest of the United Kingdom.

Contingency planning has taken on far more urgency in the past few days following a surge in support for the Yes campaign, and the bank is clearly concerned about the "material uncertainties" that could affect its credit ratings, and the fiscal, monetary, legal and regulatory landscape.

"As part of such contingency planning, RBS believes that it would be necessary to re-domicile the Bank's holding company and its primary rated operating entity (The Royal Bank of Scotland plc) to England," the bank said in a brief update.

It did, however, add that it would "retain a significant level of its operations and employment in Scotland to support its customers there and the activities of the whole bank".

Bank of Scotland-owner Lloyds Banking has said it will do the same, and others with significant operations north of the border like insurer Standard Life are widely tipped to follow suit.

This announcement from RBS is hugely significant for next week's vote. Any decision to up sticks will have a significant impact on the local economy, which should bring a heavy dose of realism back to the debate. RBS shares have underperformed the wider banking sector since the vote swung in the nationalist's favour, but recent figures from the bank have been good and share price weakness - down 5% since the end of August - is tempting buyers.

Yes, UK taxpayers will continue to own a substantial part of RBS for years to come and there are plenty of legacy issues yet to unwind. But progress is being made, and the planned sale of a 25% stake in US retail and commercial operation Citizens Financial could bring in over £2 billion this year. The rest will go by the end of 2016.

Investec Securities, a long time bear on RBS, turned more positive this week. "We believe it may yet prove costly to maintain a short position on RBS ahead of next week's vote," said the broker. "We believe any such event-specific weakness will unwind after 18 September as we anticipate a pro-Unionist vote."

It forecasts a slight dip in tangible net asset value - currently 376p - to 373p by the end of next year as it expects RBS to be modestly loss-making over the next six quarters. But a year later it estimates an increase to 423p, then 438p by the end of 2017 as lower restructuring and conduct costs drive a return to profitability.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.