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 With $25 billion of fresh capital courtesy of Treasury Secretary Hank
Paulson, Citigroup Inc.'s Vikram Pandit may go on a shopping spree for
deposits. Meanwhile, troubled U.K. bank, Royal Bank of Scotland Group
plc, which just got its own infusion from the British government, owns a relatively large bank franchise in the U.S., Citizen
Financial Group Inc., without subprime exposure. Matchmaking anyone?
Edinburgh, Scotland-based RBS said Monday it would raise £20 billion ($34.6 billion), almost double its market value. It will sell £5 billion of preference shares to the government with a fixed interest rate of 12%, while the government will underwrite the issue of a further £15 billion of ordinary shares. As expected, CEO Fred Goodwin will resign and won't receive a payoff. He will be replaced by Stephen Hester, a nonexecutive director who is currently CEO of British Land Co. plc. Johnny Cameron, chairman of the global markets unit, will leave the board, and chairman Tom McKillop will retire in April. The British government's investment has left uncertain the future of the bank's U.S. assets. In a statement Monday, McKillop suggested that some divestitures are possible, although he did not provide specifics. Citizens, headquartered in Providence, R.I., is one of the 10 largest U.S. commercial banks with about 24,000 employees and 1,600 branches in 13 states in the Northeast and Midwest. RBS built Citizens through a series of acquisitions culminating in the 2004 purchase of Ohio-based Charter One Financial Group. Although it has exposure in some of the hardest-hit real estate markets including Ohio, Rhode Island and Michigan, Citizens did not engage in subprime lending, according to an Oct. 8 story in The Boston Globe. After having lost an opportunity to buy Wachovia Corp., Citizens might make a decent consolation prize. It's certainly smaller than Wachovia, but its geography and lack of subprime loans makes it far more digestible for Citi, which still has problems in its own troubled portfolio. Plus, think of the savings on signage. - Matthew Wurtzel See earlier post from Dealscape Matthew Wurtzel is the editor of Dealscape. CategoriesComments
From: chris,
think again Chris, everything is on the table at RBS - everything. That is a quote from Mr. Hester. The article was speculative, but plausible. Wishing good thoughts will not save your job, I assume you are an employee.
Posted on:
October 15, 2008 12:19 PM
From: Matthew Wurtzel,
Chris, Indeed, I admit the post is speculative, but based on the events we've witnessed over the last few weeks, it is entirely in the realm of possibility. Look at how fast circumstances fell out of favor for Lehman, AIG, WaMu, Wachovia and Merrill Lynch? Certainly Paulson and Bernanke and their colleagues across the globe are taking steps to prevent similar circumstances from happening again. And even if those efforts to stem more failures doesn't result in RBS needing to sell Citizens, there are other factors at work that might make it enticing to consider a sale. As stated earlier in the post, Citigroup is looking to grow its deposit base, and it has additional capital -- thanks to Paulson's direct injection -- to put to work. Plus, other banks are looking for deposits, so its entirely in the realm of possibility to expect that a peer might approach RBS with an offer. Matthew Wurtzel
Posted on:
October 15, 2008 3:50 PM
From: Jerry,
Earl, I am a Citizens emplyoyee. I am curious as to where you are getting such information.
Posted on:
November 17, 2008 2:55 PM
From: wayne ,
Common economic sense 101 favors the sale of all of RBS international holders. Like AIG and Citi in the US, U.K. taxpayers and the government do not want to hold investments in banks. We will bail them out in times of trouble but certainly we have better thinks to do with our moneys. All these companies must focus on their core products and their nation of domicile.
Posted on:
December 6, 2008 10:36 PM
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Talk about irresponsible reporting and speculation. RBS publicly stated that Citizens is profitable and is core to their continued international growth and further that it is in line with what they want to scale down to be, providing core banking services. Why would you be so careless as to fuel such ridiculous speculation?