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British state-backed lender Royal Bank of Scotland is set to signal this week that it plans a partial sale of its US bank Citizens this year or next, a source close to the matter said.
RBS will say at its annual results on Thursday that its preferred option for Citizens is an initial public offering (IPO) in New York to sell about 20-25% of the bank, the source said.
Britain’s financial regulator has put pressure on RBS to sell Citizens, which analysts have valued at between $9bn and $15bn, to bolster its capital and concentrate its focus on its core UK business.
The lender is keen to avoid selling Citizens at a knock-down price, and a partial share offering would create price transparency and improve its strategic options, the source said.
The board has not finalised the plan, but the Financial Services Authority appears to be supportive, he added.
Canada’s Toronto Dominion Bank has for some time been seen as a possible buyer of Citizens. Other suitors could include US regional banks PNC and US Bancorp or Brazil’s Itau Unibanco, bankers and analysts have said.
RBS declined to comment.
The bank is under pressure to get in shape so the government can start selling its shares. The taxpayer owns 82% of RBS after a £45bn ($69bn) rescue in 2008.
RBS Chairman Philip Hampton told Reuters in October that the bank was preparing for the government to start selling its shares before the next general election in 2015.
The Bank of England has also said that banks need to strengthen their capital as fines and mis-selling costs add up, economic weakness continues and regulators impose stricter rules on how banks assess risk weightings for their assets.
RBS chief executive Stephen Hester is nearing the end of a five-year restructuring plan, which has shrunk the bank’s balance sheet by £700bn but has still left the taxpayer sitting on a paper loss of £14bn on its stake.
Still haunted by past mistakes, the bank is expected to report another loss on Thursday.
It was fined $612mn last month for manipulating Libor interest rates and is expected to set aside at least another 1bn pounds to cover the cost of mis-selling scandals.
Sky News reported at the weekend that RBS will increase its provision for mis-selling interest rate swaps by about £700mn and raise its provision for payment protection insurance claims by more than £400mn.
India wing to cut staff as it winds down retail and commercial operations
Royal Bank of Scotland (RBS) is to lay off staff in India as a part of its plan to wind down its retail and commercial operations in the country, it said in a statement, without specifying how many employees would be affected.
The announcement comes after British Prime Minister David Cameron last week said that he wants the state-controlled bank to speed its restructuring, making it clear he is keen to return it to private ownership as soon as possible.
The British government owns 82% of RBS, having pumped in £45bn ($70bn) of capital when the bank neared collapse in 2008.
A plan by RBS to sell the Indian businesses to HSBC Holdings fell through in November last year, more than two years after the two banks began negotiations.
RBS is scaling back its international operations after the 2008 bailout and has been urged by Britain’s Finance Minister George Osborne to focus on domestic activities.
“There is no impact on RBS’s markets, international banking and private banking businesses in India,” the bank said.