ROYAL Bank of Scotland, Britain’s second-largest bank following its £21 billion acquisition of NatWest last year, has hit the acquisition trail again - this time in the United States.
The Edinburgh-based bank, whose group chief executive is Fred Goodwin, has opened talks with Mellon Financial Corporation’s retail banking operations about a possible $3 billion deal to acquire Mellon’s 350 banking branches in the US.
A deal would double the size of RBoS’s US banking unit, Citizens Financial Group - which operates as Citizens Bank - and has a 330-strong bank branch network concentrated in Connecticut, Massachusetts, New Hampshire and Rhode Island.
Mellon’s branches are mainly in Pennsylvania, New Jersey and Delaware.
Citizens, headquartered in Providence, Rhode Island, is one of the 30 largest banks in the US, and the second-biggest bank in New England after Fleet Bank, a unit of FleetBoston Financial Corporation.
Last night neither Royal Bank nor Mellon would confirm that talks had begun. A spokesman for RBoS in Edinburgh said: "We never comment on rumours."
Last April, RBoS fuelled speculation that it was gearing up for a major deal in the US.
During a visit to New York, Goodwin said: "Our team here is ready to act" on potential mergers or acquisitions, most likely to be carried out through Citizens.
Goodwin is known to be very impressed with Citizens’ performance under American banker Larry Fish, who is widely recognised as an innovator leader in the American banking industry.
Fish was easily Royal Bank’s highest paid employee last year with a remuneration package of 1.3 million, plus 8.3 million under Citizen’s equity plan. He is a director of RBoS, and vice chairman of the US Federal Advisory Council, a panel of 12 bankers who serve as a key source of information for Alan Greenspan’s Federal Reserve Board which sets US interest rates.
Last March, when RBoS published its results, Goodwin hinted strongly that buying in New England, was "a possibility... But neither Larry nor I get as excited about that as we do about moving out of the region, with the opportunity to do Citizens all over again," he said.
Last night, sources in America suggested an announcement of the deal could be made within three to four weeks.
Goodwin and Fish favour a deal with Mellon because they believe Mellon’s regional consumer banking business in Pennsylvania, the sixth biggest state in the US, would give Royal Bank the chance to replicate the success story of Citizens in a contiguous geographical area.
Goodwin indicated he would not be interested in a leap into a distant trading region to Citizens’ New England base such as Texas or California.
Mellon has regional banking assets estimated at $13 billion compared with Citizens’ assets of $31.9 billion.
Its adjacent geographical position also appeals to Fish who once said his prime banking maxim was: "If you can’t drive to it, don’t lend to it."
Last night, Wall Street analysts said Mellon represents a low-risk option for RBoS, still busy integrating NatWest.
Yesterday, RBoS’s shares fell 104p to close at 1518.18p on the London Stock Exchange, while Mellon’s shares fell 27 cents to $45.37 on the New York Stock Exchange.