RBS gets good price for Citizens stake

RBS has priced the offer of a further stake in US banking arm Citizens Financial Group at up to $3.7 billion, three days after confirming it would sell again. Thankfully, demand has been strong, unlike last September when the bank was forced to slash the offer price to attract buyers.

At least 135 million shares, or a quarter of the business, will be sold at $23.75 a share. A further 20.25 million shares could also go if underwriters choose to exercise a 15% 30-day over-allotment option. The sales come just days after the expiry of a 180-day lock-up in place since last September.

Selling all the shares would net RBS $3.7 billion, or $3.2 billion without the over-allotment option. It will use the cash "for general business purposes," although this sale process is vital for RBS which desperately needs to improve its capital ratio.

RBS only just passed the Bank of England stress test late last year, largely due to its exposure to domestic property. Then, RBS finance chief Ewen Stevenson admitted there was still "much work to be done" to improve the resilience of its balance sheet, but that it remained on track to hit its CET1 capital ratio targets of 11% by end 2015 and at least 12% by end 2016.

Even after this sale, RBS will still own up to 45.6% of Citizens, or 41.9% assuming exercise of the entire over-allotment option. There's a 90-day lock-up in place, so RBS cannot sell again until the end of June. "This successful sale keeps RBS on track to meet our obligations and complete the divestment of Citizens by the end of 2016," said CEO Ross McEwan Thursday.

As soon as RBS gets its stake in Citizens below one third, it could effectively remove its £60 billion of risk-weighted assets from its balance sheet.

That's all good news, but the taxpayer-owned bank revealed a seventh year of heavy reported losses last month. Numbers missed estimates and the City quickly turned on RBS. The share price is down 15% since.

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