Royal Bank of Scotland said Friday that Spanish bank Santander has backed out of its deal to buy 316 of RBS branches in the U.K., leaving the bailed-out bank looking for a new buyer.

RBS, which is 82 percent owned by British taxpayers, was required by the European Commission in 2009 to sell the branches as a condition for receiving state aid. In August 2010, Santander agreed to buy the 316 RBS branches in England and Wales, along with the NatWest branch business in Scotland, but the deal was delayed several times.

Chief executive Stephen Hester said Friday the deal's collapse was disappointing and that RBS now will start looking for a new buyer, stressing that "much of the heavy lifting" on any disposal of the branches has already been completed.

"While this is a profitable part of our business that we would rather not part with, RBS has worked hard to ensure it is substantially separate from our U.K. branch network and corporate business and largely ready to be taken on by a new owner," he said in a statement.

Santander said it decided to pull out of the deal after it became apparent that a revised deadline for the deal to be completed would not be achieved. It told RBS it was not willing to agree a further extension to that deadline, the bank added.

The sale was originally scheduled to be completed in 2011 but later delayed.

"Our guiding principle throughout this transaction has been a seamless journey for customers — which requires the business to be delivered to Santander UK by RBS in a steady state," Santander U.K. chief executive Ana Botin said. "We have concluded that given delays, it is not possible to complete this within a reasonable timeframe."

RBS said it would continue to work on fulfilling its obligations to the European Commission and pledged that Santander's decision to pull out would not impact service to customers.