Biggest bank IPO of the year, as RBS values US bank Citizens at up to $14bn

 
Tim Wallace
Follow Tim
Ross McEwan became RBS chief last year, and is charged with selling off overseas units

RBS hopes to raise $3.5bn (£2.2bn) by selling the first chunk of its US retail bank Citizens, the bailed-out bank announced yesterday.

It will be the biggest banking sale of the year, and reflects the renewed confidence markets have in newly-floated stocks.

RBS is selling Citizens as part of its wider plan to cut back foreign operations and focus more fully on UK retail banking work.

The initial public offering will see RBS part with a 25 per cent stake in Citizens. It has set a price range of $23 to $25 for the 140m shares in this tranche, raising $3.2bn to $3.5bn, and valuing the unit at $12.9bn to $14bn.

The healthy price for the bank may also be supported by its profitability – it made $479m in the first half of 2014, rebounding from a $3.4bn loss in 2014. RBS has hired JP Morgan as joint bookrunner on the sale.

It has appointed a large transatlantic team to the sale, including UK financial institutions head Piers Davison, and his North American counterpart Fernando Rivas. Global equity capital markets boss Liz Myers is also part of the team heading the sale, as well as North American executive director Scott Hynes. Investment banks Morgan Stanley and Goldman Sachs have been appointed global co-ordinators, while US law firm Davis Polk will advise RBS on the sale. RBS shares slid 1.3 per cent.

BEHIND THE DEAL: DAVIS POLK, NICHOLAS KRONFELD

  • Kronfeld started work at Davis Polk more than 20 years ago, and although he now works in New York he did spend time in the 1990s in the firm’s London office. He was made partner in 1999.
  • The lawyer has a long history of working on banking sales and flotations. Santander is a major client, and Kronfeld’s work on stock and note offerings for the bank in Latin America have won him a raft of awards across the continent.
  • The Citizens sale is unusual in that it is approaching a forced sale – bailed-out RBS has to sell overseas assets under a government-approved plan. But its return to profitability combined with positive market sentiment mean RBS is confident of a successful sale at a good price.
  • Also advising... JP Morgan is running the book on the sale. Investment banks Morgan Stanley and Goldman Sachs have been hired as global co-ordinators. Another US law firm is also involved – Cleary Gottlieb Steen & Hamilton will be advising the investment banks who are selling the stock for RBS.

Related articles