UK to take major stake in Citizens' parent bank

The government of the United Kingdom's prime minister, Gordon Brown, will today take a majority stake in Royal Bank of Scotland Group PLC, the parent of Providence-based Citizens Financial Group Inc., two people familiar with the situation told Bloomberg News yesterday.

It's unclear precisely what impact the deal would have on its Citizens, which is the second-largest bank that operates in Massachusetts, with 259 Bay State branches.

Royal Bank's chief executive, Fred Goodwin, was set to resign as part of the recapitalization deal, British newspapers reported yesterday on their websites. A bank spokeswoman wouldn't discuss that matter, and Citizens Bank executives declined to comment yesterday.

An RBC Capital Markets banking analyst, Gerard Cassidy, said that if Goodwin does leave that would be likely to lead to a review of all of Royal Bank's operations.

Cassidy said he didn't expect Royal Bank to take steps such as selling Citizens, since the bank is profitable and the deal with the British government would ease the need to raise capital.

Brown will name representatives to the bank's board and work with the management on issues including executive pay, said the people, who spoke on condition of anonymity. The government will own just over half of Royal Bank, one person said.

Royal Bank of Scotland, once the United Kingdom's second-biggest bank, lost 61 percent of its market value last week and now ranks fourth by market capitalization. It paid $19.3 billion for a stake of ABN Amro Holdings NV last year.