Speculation is heating up again that Royal Bank of Scotland may sell Citizens Financial Group before long.
The British outlet Sky News reported Tuesday that RBS’s chief regulator, Andrew Bailey of the Financial Services Authority, sent a letter last week to RBS CEO Stephen Hester urging him to consider selling Providence-based Citizens, suggesting it would make RBS stronger ahead of the British government’s expected sale of taxpayers’ stake in the bank.
“FSA insiders said that Mr Bailey told Mr Hester that selling Citizens, its US banking arm, and radically reducing the size of [RBS's] global banking and markets operation could be helpful in bolstering RBS’s capital position,” Mark Kleinman, Sky News’ City of London editor, wrote Tuesday.
“Some RBS insiders questioned whether selling Citizens at current market valuations would achieve the FSA’s objective of improving its capital position,” Kleinman wrote. Both Sky and The Guardian cited a Shore Capital analysis suggesting “a reasonable price” that RBS could accept for Citizens would be above about $9.7 billion.
Sky News previously reported that UK Financial Investments (UKFI), which manages the British taxpayer’s 82% ownership stake in the part-nationalized RBS, has also pushed for a sell-off of Citizens as the bank attempts to recover from the financial crisis.
The disclosure of Bailey’s letter to Hester follows an article Monday by This is Money, a sister outlet of London’s Daily Mail newspaper, that cited anonymous sources to suggest plans by RBS to sell Citizens “have been derailed by a U.S. investigation into allegations it laundered money for rogue nations such as Iran.” The article went on to say “insiders” fear RBS won’t be able to sell Citizens for up to five years because of the investigation. It also alleged RBS has rejected an overture about Citizens from Canada’s TD Bank.
RBS bought Citizens in 1988.
Separately, American Banker reported Thursday that Citizens has hired J.P. Morgan Chase executive Michael J. Cleary as its new head of U.S. distribution for consumer banking.