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 Shares were sold at $21.50 apiece in the initial public offering in
New York, lower than expected and valuing Citizens at $12 billion.
The offer raised about $3 billion for British state-backed RBS,
making it the second biggest in the United States this year, after
Alibaba BABA.N raised $21.8 billion last week.
RBS had originally planned to sell shares in its U.S. bank at
between $23 and $25. It cut the price due to investor uncertainty
whether the bank can meet its profitability targets and a more
lacklustre appetite for financial stocks than other sectors,
analysts said.
RBS shares fell 1.1 percent to 354 pence by 0940 GMT,
underperforming a 0.4 percent dip by the European banking index
.SX7P.
"The reduced sale proceeds may take some of the froth out of the RBS
'bull' case, but perhaps the bigger picture is that an anticipated
capital uplift of 2-2.5 percent should still follow upon
deconsolidation," said Ian Gordon, analyst at Investec.
RBS, which had 100 percent-owned Citizens, sold 140 million shares
and could sell 21 million more in an over-allotment option, which
would lift its proceeds to $3.5 billion and see it sell 29 percent
of the U.S. business.
The bank, which is 80 percent-owned by the British government, is
hiving off the 186-year-old Rhode Island-based business as it is
under pressure from regulators and lawmakers to bolster its capital
and focus on lending to UK households and businesses.
RBS intends to fully sell Citizens by the end of 2016. It was
ordered to sell the business by European regulators as a cost of
taking 45 billion pounds ($73.7 billion) of taxpayer rescue cash in
2008.
"Selling Citizens will significantly improve our capital position
and help us to create a strong and secure bank," RBS Chief Executive
Ross McEwan said.
PREMIUM
Analysts have said that once RBS sells at least half of Citizens,
probably in the first half of 2015, its core capital adequacy ratio
should be boosted by 2-3 percentage points, although the initial IPO
is unlikely to have much impact.
The sale price values Citizens at 0.9 times its net tangible book
value of $13.1 billion at the end of June. That represents a premium
to RBS shares, which are trading at about 0.7 times book value, but
below U.S. banks of a similar size, such as Fifth Third FITB.O and
BB&T Corp. BBT.N, that on average trade at near 1.2 times book
value, according to Reuters data.
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Financial IPOs have fared poorly in the United States this year,
with Santander Consumer USA SC.N down around 25 percent since it
went public in January.
In Britain, new bank listings have fared better with shares in
Onesavings OSBO.L and TSB TSB.L, two challenger banks seeking to
take on the established lenders, up 17.5 and 7 percent respectively
since they went public in June, outperforming the European benchmark
of bank shares which is down around 2 percent in the same period.
More British banks are seeking listings, with Aldermore planning to
float next month in a debut that could value it at up to 900 million
pounds, while Virgin Money is also expected to float this year.
Citizens provides retail and commercial banking services to about 5
million customers in the United States and ranks as the country's
13th biggest retail bank holding with about $130 billion in assets.
The company was bought by RBS in 1988 and expanded with 25
acquisitions, including the 2004 purchase of Charter One.
It had 18,000 staff and 1,200 branches in 11 states across the New
England, Mid-Atlantic and Midwest regions at the end of June. It had
a net profit of $479 million in the six months to the end of June on
revenue of $2.6 billion.
Citizens shares will start trading on Wednesday on the New York
Stock Exchange. Morgan Stanley, Goldman Sachs & Co and J.P. Morgan
were lead advisors on the IPO.
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