Speculation surfaces again over whether Royal Bank of Scotland might have to sell Citizens Bank

For the second time in three months, speculation is swirling that the ailing Royal Bank of Scotland may have to sell its US subsidiary, Citizens Financial Group, to raise money.

The latest rumors have been fueled by reports that the British bank’s chief regulator urged RBS chief Stephen Hester in a recent letter to consider selling Citizens, which has its headquarters in Providence. The British government, which bailed out the bank during the financial crisis, still has about an 81 percent ownership stake and would eventually like to be repaid.

Analysts have also speculated that RBS might have to sell Citizens because of financial problems in the European Union and other challenges. Royal Bank has racked up billions of dollars in losses this year from accounting charges and faces potential lawsuits and government fines over revelations it may have helped traders manipulate the Libor lending rate index — which banks use to set a host of commercial and consumer loan rates. In addition, Spanish banking giant Santander backed out of a deal to buy more than 300 RBS branches in the United Kingdom for about $2.6 billion earlier this month.

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But RBS has so far resisted calls to sell Citizens, one of the country’s largest regional banks. Citizens has 1,400 branches in 12 states, including 254 in Massachusetts. It employs nearly 19,000 people, including about 3,400 here.

Citizens has become one of the more profitable parts of RBS and has helped shore up earnings. In addition, analysts say Citizens would probably not be able to fetch a premium price today because many other prospective buyers are also under pressure to raise capital and the US economy has not fully recovered from the recession.

“Clearly, RBS management does not want to sell,” said Gerard Cassidy, an analyst with RBC Capital Markets in Portland, Maine, who said RBS would benefit by waiting. “It’s really a question of how long they can keep the government at bay.”

Although Cassidy and other analysts are not sure a Citizens sale is imminent, they believe it will probably happen within five years.

Mark Phin, an analyst for New York investment bank Keefe, Bruyette & Woods, said RBS wants to wait until Citizens is more profitable and could fetch more cash.

An RBS spokesman declined to comment Monday . But in speaking with analysts in August, Hester said, “We have always said that Citizens is part of our core plans.” He also noted that Citizens has already increased in value over the past three years and would probably be more valuable in another three years as earnings improve.

The topic is expected to come up again when RBS, which bought Citizens in 1988, reports third-quarter financial results on Nov. 2.

If RBS sold Citizens next year, the bank would probably bring $12 billion, according to Cormac Leech, a banking analyst for London investment bank Liberum Capital. A report in the New York Post two months ago suggested RBS was holding out for more, perhaps $14 billion to $16 billion. “The longer they wait, the higher the achievable price,” Leech said.

Analysts say the most likely buyers remain Canada’s Toronto-Dominion Bank and Brazil’s Itaú Unibanco.

TD Bank — already one of the largest regional retail banks on the East Coast and the fourth largest in Massachusetts — is also considered a potential bidder because it fared better during the financial crisis than many US banks and has been trying to expand its US presence. The bank declined to comment Monday on whether it is interested in Citizens.

“TD is always listed as the buyer of anything that is for sale in the Northeast and down the Eastern Seaboard and they have a track record of deals that justifies that speculation,” said Brian Klock, an analyst at Keefe, Bruyette & Woods.

But Block noted TD Bank might not want Citizens’ operations in the Midwest, so it is possible that Citizens could be split up and sold to two different buyers.

In addition, Itaú Unibanco of São Paulo, Brazil — one of the largest banks in South America — has also been mentioned as a possible bidder in recent months. In August, the bank denied speculation that it was already in talks to buy Citizens, or any other US financial institution, and repeated that statement Monday. The bank, however, said it is “always considering options for expanding its operations.”