The latest round of rumors about Royal Bank of Scotland selling Citizens Financial Group have hopped the pond.
A Wall Street Journal article published Monday confirms reports that surfaced in Britain last week about the growing pressure British regulators are placing on RBS to sell Providence-based Citizens. The officials want “to slim down RBS, refocus it on its home market and thicken its capital cushion,” according to the WSJ, which notes British taxpayers still own 81% of the bank after the government was forced to rescue it during the financial crisis.
And not for the first time, speculation about who would buy Citizens is centered on TD Bank of Canada. From the WSJ story:
Analysts and investment bankers say Canada’s TD Bank Group would be the most likely buyer. Through previous acquisitions, the Toronto lender has amassed about 1,300 branches in the U.S. and ranks seventh in total deposits, according to the FDIC. TD Bank lacks a strong presence in some New England states where Citizens dominates. …
Beyond TD Bank, the list of potential buyers is short. Some U.S. regional banks are busy integrating recent deals, and regulators are likely to frown upon large acquisitions by U.S. megabanks. “There’s real regulatory scrutiny of deals,” Mr. Cassidy said.
The dearth of obvious buyers could give RBS ammunition to resist pressure to sell. The U.K. government takes what it calls an “arms’ length” approach to management of its RBS investment, with the independent U.K Financial Investments Ltd. overseeing its stake.
The report says Citizens currently has nearly 1,500 branches in 13 states and ranks as the 17th-largest U.S. bank by deposits, with $75.5 billion as of June 30. Citizens’ market share is 3rd-largest in the Boston metro area and fourth-largest in Cleveland and Albany.
KBW analysts wrote back in August that Citizens would complement TD and “we believe that TD has a track record as a proven integrator and an efficient operator—thus we believe TD could improve Citizens’ profitability meaningfully in a potential acquisition.” Still, KBW also expected that TD would need to divest some assets in the U.S. to get the deal done.
In the same note, KBW also ruled out U.S. buyers because capable ones would likely run into deposit cap regulations. And the smaller regional banks that would remain under the maximum deposit threshold have been quite wary of deals.