Failed stress test hits RBS' chances of fast Citizens sale

Tim Wallace
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RBS’ shares fell this morning after its US arm Citizens failed a Fed stress test, knocking the bank’s chances of a quick sale to another lender.

Although the main plan is to float the bank, it has been in early-stage talks with other banks including Japan’s Sumitomo Mitsui over a trade sale.

But failing the stress test has knocked sentiment around the bank, and could delay any bids until the problems are cleared up.

“Even though this is a slightly intangible issue – RBS is required to address governance and capital planning and reporting issues – I think it is likely to dampen expectations of the chance of a left-field bidder emerging for the business this year,” said banking analyst Ian Gordon from Investec.

“There is potential for an adverse impact from this on the possibility of an early bid.”

RBS maintained its main plan is to float Citizens, rather than sell it to another lender.

The US arm is in fact more capitalised than it needs to be. The excess is likely to be given back to the parent group either in annual dividends or in a higher sale price when Citizens floats.

“Citizens continues to be one of the best-capitalised banks in the industry and we’re pleased to be able to continue normalising our capital structure, through dividends and subordinated debt exchanges with our parent at the same pace as last year,” said Citizens’ chairman and chief executive Bruce Van Saun.

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