The U.S. banking division of the Royal Bank of Scotland Group PLC (NYSE: RBS) is expected to price its initial public offering (IPO) Tuesday and begin trading Wednesday. Citizens Financial Group is the 13th largest retail bank holding company in the United States, and RBS is expected to raise more than $3.3 billion in the IPO at a valuation of up to $14 billion. That is the largest U.S. bank IPO since 1999, when Goldman Sachs Group Inc. (NYSE: GS) came public.
RBS plans to sell a stake of about 25% (140 million shares) in the company for $23 to $25 a share. Citizens Financial listed 1,230 branch offices and 3,215 ATMs across 11 states at the end of June and said assets included $89 billion in loans outstanding and $92 billion in deposits.
Underwriters include Morgan Stanley, Goldman Sachs, J.P. Morgan, Barclays, Citigroup, Deutsche Bank Securities, RBS and Wells Fargo Securities. The underwriters have been granted an overallotment option on an additional 21 million shares. If all the options are taken, RBS’s holding in the bank will be reduced to about 72%.
Citizens will receive no proceeds from the IPO. RBS is expected to use the dividend to improve its capital ratios and to recover from the punishment it took during the financial crisis.
In its Form S-1 filing, Citizens Financial said that it expects to pay a quarterly dividend of $0.10 per share. The bank plans to double its return on equity over the next two or three years.
Shares are expected to price Tuesday and to begin trading Wednesday on the New York Stock Exchange under the ticker symbol CFG.
Other recent U.S. financial IPOs include Ally Financial Inc. (NYSE: ALLY), which raised $2.4 billion in its April IPO, and Synchrony Financial (NYSE: SYF), which raised about $2.9 billion.
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