Royal Bank of Scotland Group Plc will sell the British government almost $31 billion of stock and a majority stake, putting the parent of Citizens Bank in the United States, under control of the U.K. government in that nation's biggest bailout.
Citizens' 128 branches in Western Pennsylvania are the second-most in this region, behind only National City Bank's 158. Citizens' share of local consumer deposits -- at 8 percent -- are the fourth-highest share of any bank doing business here.
"It's business as usual," said Mike Jones, spokesman for Citizens, one of the 10 largest banks in the U.S. "We're lending, and will continue to serve the needs of our customers."
The Scottish bank owns Citizens Financial Group, the parent of Citizens Bank of Pennsylvania. Citizens Financial created the Pennsylvania bank from its 2001 acquisition of the former Mellon Financial Corp.'s retail bank franchise.
Last month, RBS' newly named CEO Stephen Hester told analysts that the Scottish bank would "make material changes to strategy." But analysts did not think Hester would sell Citizens Financial because it contributed 13 percent of RBS' pre-tax profit last year.
Friday, RBS investors decided to buy 56 million shares of the bank's stock under a recapitalization plan, the Edinburgh-based bank said in a statement. The government will buy remaining shares offered by RBS, giving it a 58 percent stake, and also purchase preferred stock.
RBS, Lloyds TSB Group Plc and HBOS Plc agreed to sell of stock under Prime Minister Gordon Brown's plan to shore up capital in the British banking system. While RBS investors approved the bailout, most declined to buy shares. Brown wants to increase lending to small business and homebuyers to counteract the worst recession for 17 years and return RBS to private ownership as soon as possible.
"It's a difficult balancing act," said Simon Willis, a London-based analyst at NCB Stockbrokers Ltd. who has an "accumulate" rating on RBS. "The government has got to maintain lending to stop a downward spiral in the economy, but that may contradict the best interests of profit for banks."
RBS, Britain's second-biggest bank before it lost 86 percent of market value this year. It may post its first annual loss in 40 years as bad loans increase, the company said this month. The bank has posted more than $10.8 billion of credit losses this year and probably will take more writedowns in the fourth quarter, CEO Hester said earlier this month.
Hester's predecessor Fred Goodwin used leveraged loans, securities trading and $90 billion of acquisitions to turn RBS into one of the biggest banks in the world during eight years as CEO. His $18.6 billion acquisition of ABN Amro Holding NV last year, part of the world's biggest banking takeover, triggered a third of the bank's first-half writedowns and eroded capital.
No comments:
Post a Comment