Sale of Citizens Bank by Scottish parent could attract Pa. interest
By Thomas Olson
Published: Monday, Oct. 22, 2012, 10:38 a.m.
Citizens Bank likely will be sold because U.K. regulators are pressuring its Scottish parent to raise much-needed capital, industry experts said on Monday.
Citzens — Western Pennsylvania's second-largest bank with 132 branches — is part of RBS Citizens Financial Group, based in Providence, R.I., which is the American banking franchise of the Royal Bank of Scotland.
The U.K. government owns 81 percent of Royal Bank of Scotland from a nearly $73 billion bailout in 2008 and can call the shots, banking experts said.
Bank of America, JPMorgan Chase or Wells Fargo are possible buyers, they said.
“If the U.K. government thinks it's good for U.K. taxpayers for RBS to raise capital by selling RBS Citizens, and they don't have an alternative, RBS would have to follow through with it,” said Nancy Atkinson, a senior bank analyst at Aite Group in Boston.
Given its financial trouble, Royal Bank of Scotland is obliged to explore ways to raise money, said Martin McGuinn, former CEO of Mellon Financial Corp., who sold the bank's three-state banking franchise to Citizens Financial in 2001. Mellon later merged with Bank of New York to form Bank of New York Mellon Corp.
“Their franchise in the U.S. is a natural because it's valuable,” McGuinn said. “The irony is that because Citizens is a valuable franchise, they'd like to keep it from a strategic point of view for the revenue it produces. But that value can deliver the capital they sorely need.”
Asked about the prospect of a sale, Royal Bank of Scotland spokesman Michael Strachan in Edinburgh said in an email that Chief Executive Stephen Hester in August called the U.S. bank “part of our core plans,” and that it would be “more valuable” for shareholders “three years from now.”
Strachan would not say whether Hester has changed his stance or whether Royal Bank of Scotland would rule out a sale.
Citizens Bank holds $6.88 billion in deposits in the seven-county Pittsburgh region, a 7.1 percent share of the market, according to the Federal Deposit Insurance Corp. The bank's U.S. parent has more than 1,400 branches and ranks as the nation's 13th-largest bank by deposits, with $93 billion.
Industry experts said possible buyers of RBS Citizens could include the nation's biggest banks, most of which do not operate branches in Western Pennsylvania.
“You're talking Bank of America, JPMorgan Chase or Wells Fargo,” said Anthony Carfang, partner at Treasury Strategies, a Chicago-based consultant. “Neither Bank of America nor Chase has a Pennsylvania franchise, so that would fill in part of their geographic puzzle.”
Wells Fargo has a large presence in Philadelphia from its 2008 acquisition of Wachovia Corp.
“PNC might be interested, in order to make sure a bank like JPMorgan Chase or Wells stays out of Pittsburgh. It also would give PNC an entree into New England,” Carfang said.
Yet he and other analysts doubt that U.S. regulators would allow PNC to swallow Citizens Bank because such a deal would give PNC too much market concentration. A PNC spokesman did not respond to a request for comment.
PNC controls 44 percent of deposits in the Pittsburgh-area market and 4 percent in the Philadelphia market, FDIC data show.
“There would be U.S. government concerns from an antitrust standpoint if any of the largest banks tried to buy (RBS) Citizens,” said analyst Atkinson. “There's also some concern about ‘too big to fail' among the top five or six banks, who already have well over $200 billion-plus in assets each.”
“Too big to fail” means the government virtually must bail out a troubled bank because it's so big that its failure would take down other institutions and hurt the U.S economy.
Teetering financial and manufacturing giants in 2008 produced the government's $700 billion bailout program, known as the Troubled Asset Relief Program, or TARP. Taxpayers, through TARP, provided billions to major and community-sized banks. It was meant to spur lending, though critics say that was largely ineffective.
Royal Bank of Scotland might be able to sidestep an outright sale of RBS Citizens to another bank, Carfang said, by spinning off its U.S. franchise to shareholders. Alternatively, it could sell RBS Citizens in an initial public offering.
Thomas Olson is a staff writer for Trib Total Media. He can be reached a 412-320-7854 or at firstname.lastname@example.org.
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.
- Samsung introduces free streaming radio service
- Penguins stave off Ducks’ shooting barrage to win in shootout
- Rand Paul urges conservatives to elect ‘lovers of liberty’
- Penguins notebook: Maatta leaves lasting impression with Selanne
- Trade to Penguins caps frenetic period for winger Stempniak
- Minorities crucial to filling Marcellus shale gas drilling jobs
- Alle-Kiski car dealers ready for thaw
- Clairton Seuss Cafe just what doctor ordered for love of reading
- Neighbors say bright, flashing sign interferes with sleep
- Steelers score with Springdale fundraiser
- Borough to revisit zoning