ROYAL BANK of Scotland, Britain’s biggest government-owned bank and the parent of Ulster Bank, may consider selling Citizens Financial Group, a US unit, after the British chancellor of the exchequer, George Osborne, said the lender should be more UK-focused.
The US constitutes the Edinburgh-based bank’s second biggest market, accounting for 22 per cent of revenue at the end of 2010, or £6.9 billion.
RBS owns Citizens, a consumer and commercial unit it bought in 1988 and which generates 9 per cent of revenue, and Stamford, Connecticut-based RBS Securities, an investment banking unit.
The bank is also poised to sell a £1.36 billion property loan portfolio to a fund managed by Blackstone as it battles to retreat from riskier real estate lending, a person familiar with the deal told Reuters.
The deal follows a tortuous sale process that faltered in September as global financial turmoil caused outside debt funders to pull out of talks and means RBS retains greater exposure to the loans for longer than it hoped.
The loans will be put into a jointly owned vehicle in which the state-owned bank will hold a 75 per cent equity stake that it will sell down by the end of 2013, the person said. US private equity giant Blackstone, backed by China Investment Corporation, will take a 25 per cent equity share and manage the properties.
The underlying assets, which number 29, were deemed riskier to the bank because they were outside so-called prime locations and have higher loan-to-value ratios, a calculation that measures debt held over a property against its value.
The vehicle bought the loans at a discount of about 30 per cent and both sides stand to benefit once they are securitised or sold.
RBS initially sought third-party debt funding of about 60 per cent for the deal, code named Project Isobel, as part of an attempt to reduce its estimated £80 billion property exposure following a government bailout during the credit crisis.
Talks faltered after RBS failed to secure backing from Goldman Sachs, Citi and HSBC, and the bank will now fund the deal with its own debt of £550 million. . – (Reuters/Bloomberg)
