RBS to sell a quarter of US subsidiary through IPO

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.