RBS Open to Bids for Citizens Amid IPO PreparationsMatthew Monks
Royal Bank of Scotland Group Plc would be open to takeover offers for its U.S. subsidiary as it prepares the division for an initial public offering this year, the unit’s chief executive officer said.
“If somebody came in with a blow-away price they’d certainly respond to that,” Bruce Van Saun, CEO of Providence, Rhode Island-based RBS Citizens Financial Group Inc., said in a Jan. 7 interview. “But there’s a paucity of buyers today.”
RBS is instead pushing forward with an IPO planned for the fourth quarter, Van Saun said. The sale of Citizens’ Chicago branches to U.S. Bancorp, announced this week, is part of that effort. The bank will use more than $300 million in proceeds from that branch sale to hire hundreds of small-business bankers, home-loan offers, and wealth-management advisers as it seeks to boost profit.
While Citizens has held talks with some potential buyers, they haven’t led to “anything that is really substantial,” Van Saun said, declining to identify the possible acquirers. The Sunday Times reported in October that Toronto-Dominion Bank, Canada’s second-largest lender by assets, considered a bid for Citizens.
The U.S. bank’s scale and heightened regulatory scrutiny has made buyers wary, Van Saun said. Continuing efforts to turn around the lender’s business also make it hard for RBS to fetch a fair price for the franchise, he said.
Citizens is the 24th-largest U.S. bank holding company with $121 billion in assets and almost $12 billion in tangible equity at the end of September, according to company filings and regulatory data. A sale could be the largest U.S. bank deal since Capital One Financial Corp. bought ING Groep NV’s online U.S. bank for $9 billion in 2011, according to data compiled by Bloomberg.
RBS has a market value of 41 billion pounds ($67.5 billion).
The bank swung to a loss of $3.6 billion in the first nine months of 2013, from a profit of $542 million a year earlier, according to filings with the Federal Reserve. The loss was driven by a $4.4 billion writedown of the company’s retail bank amid the slow recovery of the U.S. economy, RBS said in a filing.
Regulators are wary of letting large financial institutions get any bigger in the wake of financial crisis. There were two purchases of U.S. banks that topped $1 billion last year, compared with 10 each in 2006 and 2007, data compiled by Bloomberg show.
RBS’s IPO plan for Citizens sends a signal to potential buyers, Van Saun said.
“It lets people know that if they are interested they should pick up the phone,” he said. Citizens has about 1,300 branches in 11 states, excluding the Chicago branch network, according to its website.
RBS, Britain’s biggest government-owned bank, has said it will sell its remaining position in Citizens by the end of 2016, after offering a 25 percent stake in an IPO this year. The U.K. lender’s balance sheet has shrunk by more than 900 billion pounds since it received a 45.5 billion pound rescue during the financial crisis -- the biggest bank bailout ever. RBS has cut more than 41,000 jobs since then.
The deal for the Chicago branches suggests that RBS might be able to get the most value for Citizens by selling it in chunks, said Bert Ely, an independent bank consultant. Citizens also may become a more attractive target if it shrinks by exiting other regions in which it has lackluster market share, he said.
“Some of the pieces may be worth more than the bank as a whole,” Ely said.