The Citizens debut on Wednesday in the New York Stock Exchange started off slowly and later picked up, ending 7.4% up on the day. Yesterday marked Citizens Financial Group’s first day as a publicly traded business since 1988.
The Royal Bank of Scotland (RBS), which sold 140 common stocks, representing a 24% stake in the Providence-based bank, had to reduce the price of shares in the IPO from a $23 to $25 range to $21.50 because of fears that investors may otherwise have been too reluctant to buy. This may look like a lackluster sale, but it is still a giant stride towards RBS’s recovery, the UK bank that was nearly ripped to shreds by the financial crisis.
By the end of trading on Thursday, shares increased by $1.58 to $23.08, which is seen as a vindication for Citizens and RBS, which is 80% owned by the British taxpayer after being bailed out during the financial crisis with ₤45 billion.
RBS raised $3.1 billion from the IPO, which was the second largest in the United States this year, after Alibaba’s $25 billion IPO last week.
Citizen’s 7.4% rise on its debut day contrasts with Alibaba’s 38%.
Citizens, the 23rd-biggest insured commercial bank in the United States, was acquired by RBS in 1988 for $440 million. Citizens then bought State Street Corp and what is today Bank of New York Mellon Corp.
RBS had never intended to sell off Citizens
RBS had planned to grow within the US and had never planned to sell Citizens. After being rescued by the UK government, however, everything changed. British regulators forced the Edinburgh-based bank to sell off assets to raise capital.
RBS plans to sell the rest of its Citizens stake by the end of 2016. When it does manage to sell off all its Citizens stake, its fully-loaded Basel III core equity Tier 1 capital ratio is expected to rise by at least two percentage points.
Citizens Financial Group is a $127 billion commercial bank holding company employing 18,400 workers. It has more than 1,300 branches and about 3,500 ATMS in 12 states.
Experts say it faces an uphill struggle to boost profitability and returns in an environment of record-low interest rates and more stringent banking rules, which are squeezing the bottom line across the industry.
Ross McEwan, CEO of RBS, said regarding Citizens’ IPO:
“This I.P.O. represents a key step on the path to full divestment. Selling Citizens will significantly improve our capital position and help us to create a strong and secure bank that can continue to fully support the needs of its customers.”