RBS won't have to sell Citizens
Citizens Financial Group will remain part of the Royal Bank of Scotland Group, the troubled UK bank announced today, after intense negotiations with financial regulators that resulted in a fresh capital injection and the forced sale of some assets.
Under its deal with British and European regulators, the Royal Bank will receive nearly $42 billion in additional government funds and agreed to sell off its insurance unit, 318 bank branches in England and Wales, and a commodities venture in San Francisco within four years. The company fought successfully to keep its US banking operation, Providence-based Citizens, the second-largest bank in the Boston area, with $153 billion in assets.
“Today’s announcement once again affirms that [Citizens] is a valued part of the RBS Group,” said Ellen Alemany, chairman and chief executive of Citizens Financial and RBS Americas, in a statement. “We will continue to serve the needs of our customers and execute on our long-term strategic plan.”
RBS's chief executive, Stephen Hester, said in a conference call that the agreement was "last major building block for our recovery plan."
The Royal Bank will now be 84 percent owned by the British government as it labors to climb back from the biggest loss in British corporate history and to repay the taxpayers for its bailout.
Hester said the bank agreed to divest the insurance unit and other assets after a "hard push" from regulators. Less revenue will make it harder for the company to grow and meet its goals of repaying the government, he said, noting that, "they are good businesses which we would rather not be divesting." But the Royal Bank had to compromise somewhere, given all the government support it is getting, he said.
Selling Citizens in the current depressed banking market would have been a further blow to the parent company's recovery, analysts and bank executives have said. Citizens lost money in the third quarter and is still struggling with bad loans in its portfolio. And many potential acquirers are still shoring up their capital and dealing with their own losses.
The Royal Bank said it would enter the government's asset-protection scheme, to insure billions of dollars in loans. And under its restructuring, subject to approval by the European Union's College of Commissioners, the bank will sell RBS Insurance, Global Merchant Services, parts of its branch network and corporate business, and its interest in RBS Sempra Commodities.
The bank had previously tried to sell its insurance business, but took it off the market in January when the offers weren't attractive.
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