Scots plan to shed stake in bank
The taxpayer-owned Royal Bank of Scotland said on Friday that it will segregate about $62 billion in soured investments to clean up its books and accelerate the divestment of RBS Citizens Financial, its American banking subsidiary.
The bank plans an initial public offering of 20 to 25 percent of RBS Citizens in late 2014, then will sell the remaining stake in offerings in 2015 and 2016, said Providence, R.I.-based RBS Citizens.
RBS Citizens is the parent of Citizens Bank, the second-largest retail bank in Western Pennsylvania. Citizens has about 130 branches in the region and holds about 8 percent of deposits.
“We have a clear plan that will facilitate our becoming an independent, standalone bank within three years,” RBS Citizens CEO Bruce Van Saun said in a statement.
Van Saun, who took over as CEO on Oct. 1, said the bank would “continue to maintain a strong business relationship with RBS,” a signal that Citizens intends to keep servicing corporate clients' global needs.
RBS Citizens officials declined to comment further on Friday. But in a recent interview with the Tribune-Review, Van Saun said shedding British control — the British government owns 81 percent of Royal Bank of Scotland — would give RBS Citizens more operating capital and flexibility.
“From Citizens' standpoint, being public would also raise the visibility of the company,” said the CEO.
“And we can control our own performance better than we can control” Royal Bank of Scotland's, he said of RBS Citizens' struggling parent.
Linda Harper, spokeswoman for Royal Bank of Scotland, declined in an email to say whether the bank had been courted by any banks interested in buying RBS Citizens.
Royal Bank of Scotland made the announcements in its earnings report, which showed that the third-quarter net loss narrowed to $1.33 billion from $2.25 billion in the same period last year.
The divestiture move is part of a plan to get the bank in shape so the government can sell its majority stake. But there will be a cost — Friday's move will result in a charge of $6.4 billion to $7.2 billion in the fourth quarter. Shares slumped 7.9 percent to $10.85 on the news.
The government had considered the possibility of splitting the bank into “good” and “bad” parts. The bad bank would have managed the soured investments. But the government concluded that such a split would do more harm than good, in part because it would distract management at a crucial moment.
Instead, RBS will form an “internal bad bank,” meaning it will segregate the soured investments, which represent about 5 percent of the bank's funded assets, and manage them separately. The goal is to sell or write off 55 percent to 70 percent of such assets by the end of 2016.
“While there is inevitable uncertainty associated with running down such assets, we have a clear aspiration to remove all these assets from the balance sheet in three years,” Chief Executive Ross McEwan, who took charge of the bank last month, said in a statement.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- McDonald’s localizes menus to battle growing competition
- Aetna to buy rival Humana for $35B
- Airlines offer small conveniences to counter higher fees, less space
- Consider these factors before opting for longer-term auto loan
- Longer, roomier, ritzier Sedona upgrades minivan to 1st-class
- Air control stickiness a real puzzler
- National Day Calendar lends legitimacy to pseudo-holidays
- Obama overtime proposal slammed
- Insurer Aetna to buy Humana in $35B deal
- W.Pa. economy gains momentum as employers increase hiring
- Stocks end tumultuous week on down note