By Jonathan Saul and Andrew MacAskill

LONDON, July 11 (Reuters) – Royal Bank of Scotland is dealing with setbacks over a proposed sale of its Greek ship finance enterprise, with potential suitors backing off, partly due to the British vote to depart the European Union, sources instructed Reuters.

Britain’s June 23 vote has raised the danger of recession and earnings downgrades which have battered financial institution shares.

Reuters reported earlier that week that RBS had obtained bids for its Greek delivery operation. Sources stated Credit Suisse and China Merchants had been among the many suitors.

Banking and finance sources say Brexit has put into doubt any development of discussions for now – highlighting the fallout for transactions that had been within the works.

“The deal has unsettled some buyers and obviously there would be a knock-on impact on deals like this one because of Brexit,” one banking supply acquainted with the matter stated.

RBS declined to remark.

Two separate finance sources stated Credit Suisse had backed away.

“Interest has definitely cooled and Brexit does not help,” one stated. “Capital pressures on European banks are also weighing on such portfolio sales now.”

A 3rd supply added: “If you are a Chinese buyer, the whole thing might now appear too scary or complicated.”

China Merchants didn’t reply to an emailed request for remark. Credit Suisse declined to remark.

The Greek operation was value about $3 billion though sources within the delivery enterprise stated that issues with lending to the trade, a lot of which is in a deep downturn, would have an effect on the worth of what might be recouped by way of a sale.

The enterprise additionally features a department banking licence in addition to about 40 employees, the sources stated.

They stated there was a query mark over what would occur with the banking licence, as soon as Britain pulls out of the EU, which was including to issues by potential suitors.

The British financial institution, which was rescued with a 46 billion pound ($59.70 billion) authorities bailout through the monetary disaster, had beforehand been a high lender to the worldwide delivery trade and its Greek workplace performed a pivotal function.

“RBS has to decide whether they want to try and offload this whole business at increasingly distressed prices, which has already been eroded given the non-performing part of the portfolio,” one other finance supply stated.

“If you add Brexit to this mix, it’s another complication. They may be better off to wait although the bank is under pressure to lighten its non-core segments.”

RBS, 73 % state-owned, is within the midst of a restructuring geared toward returning the financial institution to revenue after eight straight years of losses.

The financial institution’s whole delivery publicity reached 7.1 billion kilos within the first quarter of this 12 months, down from 7.5 billion kilos on the finish of final 12 months.

Non-performing loans to the trade – these on which repayments are considerably in arrears – elevated to 827 million kilos within the first quarter of this 12 months from 434 million on the finish of 2015, RBS stated in its quarterly outcomes. ($1 = 0.7705 kilos) (Additional reporting by Sophie Sassard and Sumeet Chatterjee; modifying by Adrian Croft)

(c) Copyright Thomson Reuters 2016.