Citizens Financial Group, the US banking arm of RBS with 1,230 branches across the Northeast and Midwest, announced terms for its IPO on Monday. The Providence, RI-based company plans to raise $3.4 billion by offering 140 million shares at a price range of $23 to $25. RBS is offering the entire float, and will continue to own a 75% stake after the IPO. At the midpoint of the proposed range, Citizens Financial Group would command a fully diluted market value of $13.6 billion.
Citizens Financial is the 13th largest retail bank in the US, with $130 billion in total assets (up from $127 billion as of March 31). As of June 30, it had loans of $89 billion and deposits of $92 billion, respectively. The bank reduced its footprint since its last amendment by divesting assets in the Chicago area, and now lists 1,230 branches and 3,215 ATMs across 11 states, down from 1,350 branches and 3,500 ATMs across 12 states at the end of March. In May, Citizens purchased $150 million of prime auto loans and has entered an agreement to purchase more on a rolling basis. The company operates through both a consumer banking segment, which accounts for 54% of loan and lease balances, and a commercial banking segment, which accounts for 44% of loans and leases.
Net interest income and noninterest income together grew 11% to $2.6 billion for the six months ended June 30, 2014, due to lower hedging costs and the growth of its investment securities portfolio. However, the yield on interest-earning assets fell 11 bps to 3.2% as the company saw prepayments on higher yielding fixed assets, which were replaced by lower yielding securities. Citizens' higher income from taxable investment securities was offset by a combined lower balance and lower yield on home equity loans. The company grew its automobile loan portfolio, which was again countered by lower yields. Citizens attributes its lower yields across most segments to the persistent low-rate environment targeted by the Federal Reserve. It highlights the harsh winter in the first quarter but points to the rebound in US GDP in the second quarter. Adjusted income before taxes increased 22% to $907 million, aided by an efficiency ratio that improved from 68.8% to 66.6%.
Citizens Financial, which was founded in 1828 and booked $5 billion in net interest and noninterest income
for the 12 months ended June 30, 2014, plans to list on the NYSE under the symbol CFG. Morgan Stanley, Goldman Sachs, J.P. Morgan, Barclays, Citi, Deutsche Bank, RBS and Wells Fargo are the joint bookrunners on the deal. It is expected to price during the week of Monday, September 22, 2014.
