What to do with Providence-based Citizens has been an ongoing source of friction between executives at its part-nationalized parent company, Royal Bank of Scotland in the U.K., and the British government that owns 81% of RBS after a 2008 bailout.
When we last checked in on the Citizens saga in June, the British finance minister – Chancellor of the Exchequer George Osbourne – was publicly and loudly urging the next CEO of RBS to sell off the U.S. lender rather than just float a 25% stake in a public offering, currently planned for 2014 or 2015.
Now The Times of London, citing anonymous sources, is reporting that Citizens’ on-again/off-again suitor TD Bank of Canada has become increasingly interested in purchasing the local lender since the summer. The Times estimates Citizens is currently worth about £8 billion ($12.8 billion). RBS bought Citizens in 1988.
Readers will be forgiven if they feel like they’ve seen this story before.
A little over a year ago, in August 2012, The New York Post set off a burst of speculation about a TD-Citizens tie-up with an anonymously sourced report that TD had discussed the idea informally with RBS. The rumors revived a few months later, but died down after TD Bank’s CEO poured cold water on the idea.
Still, there’s never seemed to be much doubt TD Bank would like to expand its presence in the Northeast and wouldn’t mind buying Citizens if the price was right. “Acquiring it could propel a second-tier North American bank into the big league,” The Guardian’s Juliette Garside noted of the impact on TD Bank or other potential buyers such as Cincinnati’s U.S. Bancorp or Pittsburgh’s PNC.
The Times also reports that the chancellor is “expected to reveal … in the next few weeks” whether he intends to split RBS into “good” and “bad” banks, a process the U.K. Treasury thinks could mean a larger payback for British taxpayers ahead of the country’s 2015 elections.
“RBS keeps talking about floating [Citizens], but I think it is worth more if you sell it,” one Wall Street banker who’s advising a potential buyer told The Times. “It’s an awkward size – not really big enough to float and too big to get an auction going with the big guys.”
Another British newspaper, The Daily Telegraph, reported last month that a confidential report prepared by the Swiss bank UBS also urged the British government to sell Citizens altogether.
Bruce Van Saun, who replaced Ellen Alemany this month as Citizens’ CEO, told American Banker he’s planning to hire “hundreds” of new employees to sell mortgages, make loans to small businesses and manage wealthy clients’ money in a bad to improve Citizens’ weak profits before the IPO. He also said he wants to expand lending outside Citizens’ traditional base in the Northeast and to get into car and student loans.
“We need to rejuvenate our ability to originate and put earning assets on the books,” Van Saun told the trade publication. (Boston Business Journal banking reporter Matthew Brown has doubts about whether Citizens can rely primary on revenue, as opposed to expense cuts, to improve profitability.)
Van Saun isn’t the only new executive in a new role at the bank: also taking office this month is Royal Bank of Scotland’s new CEO, Ross McEwan, who replaces Stephen Hester, a defender of holding onto Citizens.
Citizens remains by far the largest bank in Rhode Island by deposits, with its $12 billion amounting to 42% of all bank deposits in the state as of June 30, according to FDIC data. Bank of America was a distant second at 26%, followed by Washington Trust at 8%, Sovereign Bank at 7% and Bank Rhode Island at 4%. TD Bank was way down in 12th place, with only $197 million in Rhode Island deposits, or 0.68% of the total.
• Related: Citizens Bank’s future cloudy as spin-off announcement looms (Feb. 27)