The UK’s Royal Bank of Scotland (RBS) is likely to dispose of some stake in or entire US retail banking business ‘Citizens’, due to increasing regulatory pressure to offload and consolidate its operations.
The Financial Services Authority (FSA) has been exerting pressure on the 82% government owned lender to sell the business and use the earnings to shore up the core capital.
It is likely that the lender will announce an initial public offering (IPO) in order to raise substantial capital by divesting approximately 25% stake in the US banking operations soon.
Citizens, which is the second-largest bank in Rhode Island by deposits, was acquired by RBS in 2008 during the height of financial crisis, which subsequently led to the UK government injecting £45bn to keep it operating.
It is expected that the UK market regulator FSA may also order the bank to concentrate on onshore banking business and offlaod the unprofitable operations.
The divestment process, expected to take two years to complete, might yield £1.5bn to £2bn for the lender based on the recent £8bn book value of the business.
Operating as a subsidiary of RBS, Citizens manages 1,500 branches throughout the 12 states in the US.