By Corrie Driebusch
Royal Bank of Scotland Group PLC sold 135 million shares of
Citizens Financial Group Inc., raising $3.2 billion for the British
bank.
The share sale, priced at $23.75 a share late Wednesday,
represents a 6.8% discount to Citizen's closing price of $25.49 on
March 12, the last close before the share sale was announced.
The offering comes as RBS looks to focus on its domestic market
and reduces its stake in Citizens to below 50%.
RBS said Thursday that the proceeds would be used for general
business purposes, with Chief Executive Ross McEwan saying the sale
was "an integral part of the RBS capital plan" that would allow the
lender to create a stronger, safer U.K.-focused bank. RBS aims to
sell all of its Citizens stock by the end of 2016.
The discount the shares were sold at is more than the average
discount of 6% for U.S.-listed follow-ons so far this year but
below the average 7.4% discount for follow-on offerings in 2014,
according to Dealogic.
The sale by RBS appeared to go smoothly--a contrast to last
September, when Citizens launched its IPO. At the time, it took
some convincing of potential investors.
Ahead of its IPO, in March 2014, Citizens failed to meet
requirements of the Federal Reserve's "stress test," an annual
review to measure a firm's ability to continue lending during a
severe economic downturn. During its IPO roadshow, Citizens
executives openly admitted the bank needed to boost its financial
performance.
Management at the bank has repeatedly touted specific plans for
improvement, including achieving a 10% return on equity by the end
of 2016 through cost-cutting and loan growth. In its fourth-quarter
results, Citizens appeared to be making progress toward its goals,
reporting 6.8% adjusted return on equity compared with 6.2% for the
third quarter.
RBS is selling off its stake in Citizens following British
political pressure to refocus on U.K. clients. In its annual
report, the bank took a $4 billion hit on the goodwill value of
Citizens as it was forced to write the stake down to its estimated
disposal value.
Citizens, based in Providence, R.I., operates one of the largest
regional banks in the U.S., with branches throughout New England,
the mid-Atlantic and Midwest.
Write to Corrie Driebusch at corrie.driebusch@wsj.com
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