RBS boosts Citizens offering on strong interest

The taxpayer-backed lender, which floated a minority stake in Citizens on Wall Street in September, says it is now to sell off a further 135 million shares, or 24.7 per cent of the US bank – up from its earlier target of 115 million shares.

If a 15 per cent over-allotment option is triggered, the total offering will comprise 155m shares, or 28.4 per cent of Citizens’ common stock.

The offer price is $23.75, raising about $3.2 billion (£2.1bn), or $3.7bn if the over-allotment option is exercised by the underwriters.

Meanwhile, Lloyds Banking Group, also partly owned by the taxpayer following the state bailouts at the time of the financial crash, announced yesterday it had taken another step towards full private ownership after the Treasury cut its holding to below 22 per cent. Earlier this month, the Treasury sold £500 million worth of shares, leaving it with a 22.98 per cent stake.

Commenting on the Citizens development, RBS group chief executive Ross McEwan said: “The sale of Citizens is an integral part of the RBS capital plan.

“It will help us create a stronger, safer UK-focused bank that can better serve the needs of its customers. This successful sale keeps RBS on track to meet our obligations and complete the divestment of Citizens by the end of 2016.”

The European Union ordered RBS to divest the bank, which has its HQ in Providence, Rhode Island, and whose operations are focused on the US eastern seaboard, in return for the Scottish bank’s state aid at the time of the financial crash.

When the offer goes through RBS’s holding in the US bank will drop from the present 70.3 per cent to 45.6 per cent, or 41.9 per cent if the over-allotment option is exercised. RBS has said the money raised will be used for general business purposes.

One source said: “Increasing the amount of Citizens shares to be sold obviously reflects the healthy weight of interest in the offer. It has helped that Citizens has had a strong financial performance in the past few quarters.

“The bank and its advisers have clearly decided that the investor interest was such that increasing the size of the offer would not dilute the price or the quality of the offering.”

An array of America’s top investment banking names have been hired to do the book-running for the Citizens sell-down to below the key 50 per cent level, including Morgan Stanley, Goldman Sachs, JP Morgan and Citigroup.

City banking analysts said that RBS would take the healthy appetite for Citizens’ stock as a good sign that it will have no difficulty fully exiting the business by the end-of-2016 deadline.

Citizens is the third biggest retail bank in the US, with assets values at $133bn at the end of 2014. The executive team is led by former RBS finance director, Bruce Van Saun.

Under McEwan and his predecessor, Stephen Hester, and with the backing of the UK coalition government, the bank has been retrenching from many of its international and investment banking operations in order to focus on household and small business lending in the UK.

RBS bought Citizens Financial in 1988 in a deal engineered between the Royal’s then-chief executive, Sir George Mathewson, and his American counterpart, Larry Fish.

Citizens grew rapidly through vacuuming up a number of smaller banks on its patch, but always emphasised its risk-averse mentality, summed up once by Fish as: “If you can’t drive to it, don’t lend to it.”

In 2014 the group made a profit before tax of $1.27bn. RBS shares closed down 2p at 350.3p.

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