Brazilians eye takeover bid for Citizens despite Hester stressing its value to RBS

A MAJOR Brazilian bank is weighing up a possible takeover bid for Royal Bank of Scotland’s Stateside business, Rhode Island-based Citizens.

Itau Unibanco, which has a market value equivalent to about £45 billion – similar to the scale of RBS’s bailout in 2008 – is believed to be running the rule over the US business in order to expand internationally and give it a more secure, diversified funding base.

Former Citizens’ boss Larry Fish once described his ultra-cautious banking style at the lender, which he built up with former RBS chief Sir George Mathewson in the 1990s, as “if you can’t drive to it, don’t lend to it”. Mathewson’s successor, Fred Goodwin, stepped up the pace of acquisitions in America, typified by the acquisition of Charter One in 2004. Citizens now has 1,500 branches across 12 states.

The Brazilians are said to be attracted to that model and have also looked at two other US banks, Sovereign Bancorp, currently owned by Spain’s Santander, and Bank West, owned by Société Genéralé, of France.

Many analysts believe UK and European banks may sell some international assets to help beef up capital and weather the eurozone financial storm.

One said: “Everybody knows that Stephen Hester [RBS’s chief executive] believes there are no sacred cows. He has chosen his words carefully, never actually saying RBS will never sell Citizens even while asserting it remains a core business for now. It is quite possible he would wait a few more years to extract more value from a sale.”

After a loss-making sticky patch when America was in recession, Citizens has recovered profitability. At Friday’s interim RBS results, Hester revealed that profits at the US arm had risen to £331 million from £237m in the first six months of 2012.

Asked during a teleconference whether the group would consider selling up, Hester replied: “Citizens is much more valuable to our shareholders today than it was three years ago. I expect it to be more valuable to them in three years’ time.”

Sources say Itau has made no approach to RBS about a takeover of the business, The same is believed to be the case with another reported potential suitor, TD Bank of Canada.

Royal Bank of Scotland declined to comment yesterday.