RBS to sell a quarter of US subsidiary through IPO

<p>The Royal Bank of Scotland wants to sell part of Citizens Bank.</p>

The Royal Bank of Scotland (RBS) has entered the final stages of an Initial Public Offering (IPO) to sell part of its US subsidiary, Citizens Bank. Citizens Financial Group Inc. is seeking a valuation of as much as $14 billion (£8.7 billion) as it enters the final stages of an IPO.

The bank said it planned to sell 25 per cent of the shares at a price between $23 and $25 each, potentially rising to $3.5 billion, according to a regulatory filing today. Underwriters have an option to purchase an additional 21 million shares, the company said.

RBS has launched this operation amid pressure from the UK government – which owns 80 per cent of the bank – to increase its profitability in a bid to refund part of the 2008 government bailout, which reached £45.5 billion.

Chief executive Ross McEwan said the sale marked an "important milestone" for both RBS and Citizens, the BBC report. "The [sale] will significantly improve RBS's capital foundation and is a further important step in making RBS a strong and secure bank," he added.

Citizens Bank has an estimated five million customers and assets of $130.3 billion. Once the IPO is complete, its shares will be listed on the New York Stock Exchange.

The US financial institution is seeking to increase return on equity to more than ten per cent in the next two to three years fromfive per cent last year. It also plans to hire more than 550 people in its consumer bank, Bloomberg reports.

RBS will own 75 per cent of Citizens after the IPO, or 71.2 per cent if underwriters exercise their option in full, according to the filing.

It bought Citizens for $440 million in 1988. It has more than 1,200 branches in 11 states as of June 30th.

Find up to date information on the FTSE 100 and spread betting strategies at City Index.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.