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Royal Bank Of Scotland Feeling The Pain

News that Zurich Financial Services has dropped out of the bidding for the Royal Bank of Scotland's insurance division has brought the UK banking group back into the limelight with concerns that the insurance sale may have to be pulled, or raise less than the £7 billion mentioned at the onset. Even though the group recently raised £12 billion from a fund raising with shareholders, and sold another division for in excess of £3 billion, there are real concerns that the groups fundamental funding position is not as strong a that of its competitors.

Slowly but surely a number of the main bidders have dropped out of the race for the insurance division, but many thought this had left the way open for Zurich to snap up the unit. However, it now looks as though the group may struggle to raise the full £7 billion, even though there are still a couple of bidders interested.

While there is no doubting the quality of the insurance division, taking in Direct Line and Churchill Insurance, it is more an issue of timing and funding for potential buyers. There are grave concerns that as Zurich walks into the sunset, the rest of the would be bidders may follow suit.

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