RBS Said to Plan IPO for its U.S. Citizens Financial UnitGavin Finch and Whitney McFerron
Royal Bank of Scotland Group Plc, Britain’s biggest government-owned lender, will signal next week it plans to sell a 15 percent to 25 percent stake in its Citizens Financial Group Inc. unit, according to a person familiar with the plan.
No deal is imminent and the process will probably take about two years to complete, the person, who asked not to be named because they were not authorized to speak publicly on the matter, said today. RBS will announce the move when it reports full-year earnings on Feb. 28.
RBS, based in Edinburgh, has been under pressure from U.K. Financial Investments Ltd., the steward of the government’s 81 percent stake in the bank, and lawmakers to sell the U.S. consumer and commercial lender it acquired in 1988. Chief Executive Stephen Hester said in August the bank would keep hold of Rhode Island-based Citizens because it’s a “core” part of the company that will be more valuable in three years.
“This sounds like a compromise between the government regulators and the bank, in terms of how to improve capitalization of the business without forcing it sell assets at depressed prices,” said Gary Greenwood, a banking analyst at Shore Capital Ltd. in Liverpool, who has a hold rating on the stock.
The Telegraph newspaper, which reported the possible IPO earlier today, said a full sale of Citizens could ultimately raise 8 billion pounds ($12.13 billion).
Canada’s Toronto-Dominion Bank held informal talks to buy the unit, the New York Post reported on Aug. 3, without saying where it got the information.
“The Bank of England is looking at U.K. banks that are under-capitalized, and the U.K. government doesn’t want to put more money into these businesses,” Greenwood said. “They’ve got to find other ways to recapitalize and one of those ways is by selling businesses off such as Citizens.”
An RBS official declined to comment when contacted by Bloomberg News.
Hester has cut assets by more than 800 billion pounds, eliminated 36,000 jobs and scaled back RBS’s securities and Irish units since he took over from Fred Goodwin in 2008. RBS said in January last year it would cut about 3,500 jobs at the investment-banking division and sell or close its unprofitable cash equities, mergers advisory and equity capital markets divisions.
The shares have risen 21 percent in the last 12 months, giving the bank a market value of 38.5 billion pounds. On Feb. 22, the stock fell 0.4 percent to 345 pence in London trading.
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