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RBS due to avoid full split
Part-nationalised Royal Bank of Scotland is expected to avoid demands for a full carve-up when the Government rules on the lender's future today.
A Treasury-commissioned report is set to call for soured loans and toxic assets to be placed in an internal "bad bank", instead of demanding a full split, arguing it will improve lending to businesses.
The 80% state-owned lender is likely to make the announcement alongside its third-quarter results, which are forecast to show operating profits of £800 million in the three months to the end of September, lower than the £1.05 billion reported a year earlier as its investment bank shrinks.
Chancellor George Osborne appointed investment bank Rothschild during the summer to weigh up the case for a good/bad bank split, but the plan has since faced a barrage of opposition from shareholders.
Mr Osborne is under pressure to boost lending to the economy and speed up RBS's return to the private sector.
Instead, it is expected to see the creation of an internal, ring-fenced book of problem assets, containing soured commercial property loans and much of Ulster Bank, its troubled Irish business.
However, it is expected to fall short of dumping the whole of Ulster Bank - a major lender to Northern Ireland and the Republic of Ireland - into the internal "bad bank".
The plan will avoid the need for a shareholder vote, unlike a full nationalisation of the bad bank, a strategy which faced vocal investor opposition.
RBS already has a "non-core" division, run by Rory Cullinan, and the scale of the new internal "bad bank" is expected to correspond roughly with this - although it could be bulked up with more problem assets.
By the summer, RBS had already shrunk its non-core book to £45.4 billion from £258 billion in 2009. It expects to fall further to around £36 billion by the year-end.
The report could also call for an accelerated sale of its Citizens US bank, said to be worth around £8 billion, plus see the closure of its investment banking division.
Analysts at UBS recently said they see " limited benefit" from a full split.
They said: "We would not be surprised to see the existing envelope of non-core expanded with this accompanied with an acceleration of business disposals to bring RBS back to an increasingly UK-focussed business."
RBS and the Treasury declined to comment.