Stress test fail puts RBS sale of Citizens at risk
HOPES of an early sale for RBS’s US arm Citizens were knocked yesterday after it failed the Fed’s stress tests.
Although the main plan is to float the bank, starting later this year, RBS has been in early-stage talks with other banks including Japan’s Sumitomo Mitsui over a trade sale.
But failing the stress test has knocked sentiment around the bank, and could delay any bids until the problems are cleared up.
“Even though this is a slightly intangible issue – RBS is required to address governance and capital planning and reporting issues – I think it is likely to dampen expectations of the chance of a left-field bidder emerging for the business this year,” said banking analyst Ian Gordon from Investec.
RBS maintained Citizens is in fact more capitalised than it needs to be. The excess is likely to be given back to the parent group either in annual dividends or in a higher sale price.
“Citizens continues to be one of the best-capitalised banks in the industry and we’re pleased to be able to continue normalising our capital structure, through dividends and subordinated debt exchanges with our parent,” said Citizens’ boss Bruce Van Saun.
RBS said yesterday it would resubmit the capital plans for Citizens. “We clearly have more work to do to meet the Fed’s standards, and we’re fully committed to doing that,” RBS said in a statement.
Shares in the group fell 1.37 per cent yesterday.