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RBS Plans Raising $1.9 Billion in Latest Citizens Share Sale

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Royal Bank of Scotland Group Plc plans to raise as much as $1.9 billion in the latest sale of shares in its U.S. unit Citizens Financial Group Inc. to investors.

The bank, which currently owns 40.8 percent of Citizens, will offer as many as 75 million shares to institutional investors, according to an amended S-1 registration statement filed with the U.S. Securities and Exchange Commission on Tuesday. Citizens was little changed $25.91 at 11:08 a.m. in New York trading.

The sale marks the second time RBS has reduced its holding in its U.S. consumer bank this year, as part of Chief Executive Officer Ross McEwan’s plan to shrink global operations and return to profit after seven straight annual losses.

“RBS does, subject to market conditions, hope to substantially exit its position in Citizens by the end of 2015,” Ian Gordon, an analyst at Investec in London, wrote in a note to clients. “For us, this accelerates the scale of RBS’s capital build.”

The latest sale will take RBS’s stake in Citizens to about 26.8 percent, meaning that the British lender is no longer required to include the company in quarterly earnings. RBS reports first-half earnings on July 30.

The lender granted investment banks handling the sale the option to place an additional 11.25 million shares as part of the stock offering. That would take the Edinburgh-based bank’s stake down to 24.7 percent.

Return Capital

A full disposal of Citizens would add about 3 percentage points to RBS’s common equity Tier 1 ratio, a measure of its high-quality capital, the bank has said. CET1 stood at 11.5 percent at the end of March, while RBS has said it would look to return all capital to shareholders above a 13 percent threshold.

The latest sale “moves RBS closer to being able to achieve partial/full deconsolidation for regulatory reporting purposes,” wrote Gordon, who has a buy rating on the bank.

Morgan Stanley and Goldman Sachs Group Inc. are coordinating the sale, while RBS, Credit Suisse Group AG, Deutsche Bank AG, UBS Group AG, Bank of America Corp., JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo Securities are joint bookrunners, according to the filing. Barclays Plc, Keefe, Bruyette & Woods and Sandler O’Neill & Partners are co-managers.

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