Hester fights to hang on to Citizens in US

ROYAL Bank of Scotland chief executive Stephen Hester is fighting tooth and nail to keep Citizens, the group&rsquo;s flagship American retail banking business, on its books after it emerged that Europe is considering forcing it to divest the brand in the interests of competition.<br /><br />Citizens, which has over 1,480 branches in the US, is regarded as one of RBS&rsquo;s best-positioned assets because of the wide-ranging possibilities for consolidation in the country.<br /><br />Last month, at a banking and insurance CEO conference hosted by Merrill Lynch, Hester described the brand as &ldquo;a core business&rdquo;, adding: &ldquo;Our ownership of Citizens does give us strategic options in both directions, because Citizens will enjoy synergies with other banks in the United States, which could either allow us to make acquisitions on an advantaged basis or to be acquired.&rdquo;<br /><br />EU competition commissioner Neelie Kroes is mulling forcing Hester to put Citizens on the block as part of a sale of assets to compensate for state aid received by RBS over the course of the crisis and increase competition in the sector.<br /><br />Sources close to RBS said Hester is continuing to fight to keep Citizens, but that he is &ldquo;not convinced the bank will emerge the victor&rdquo;.<br /><br />As part of the EU deal, expected to be announced towards the end of this week, RBS is also expected to have to divest some 300 of its branches in England and NatWest branches in Scotland, which will be renamed after the ancient banking name Williams &amp; Glyn.<br /><br />In another blow for Hester, who had hoped RBS&rsquo;s insurance arm could help lead it back to standalone strength, the bank will also sell off its Churchill, Direct Line and Green Flag brands.<br /><br />The plans come as the government prepares to announce final details of RBS&rsquo;s participation in state insurance proposals, under which the bank will pump &pound;270bn of toxic loans into the asset protection scheme (APS).<br /><br />RBS acquired Citizens in 1988 for $440m (at the time worth &pound;240.7m) in order to increase the bank&rsquo;s strategic presence in the US. <br /><br />Since then, Rhode Island-based Citizens has grown from being the seventh largest bank in the smallest US state to become the ninth largest commercial bank in America by assets.<br />