Analyst sees roadblocks ahead for TD Bank acquisition of Citizens
BLOOMBERG FILE PHOTO/KELVIN MA
A PROPOSED ACQUISITION of RBS subsidiary Citizens Financial Group by TD Bank would cost $12.8 billion and held RBS repay the $71 billion it owes the British government, but an analyst who tracks TD Bank told the Philadelphia Business Journal Tuesday that the acquisition would face several hurdles.
The proposed $12.8 billion acquisition of Providence-based Citizens Financial Group, first reported in the Oct. 13 edition of the United Kingdom’s Sunday Times, would expand TD’s U.S. branch network and help RBS repay the $71 billion bailout it received from the British government in 2008.
However, Brian Klock, an analyst for Keefe Bruyette & Woods, told the Philadelphia Business Journal that RBS is not ready to sell Citizens – a profitable arm of the struggling British bank – and even if RBS were looking to sell, Canadian and U.S. regulators could withhold or delay approval of the acquisition.
Furthermore, Klock said, TD Bank would need to raise about $8 billion in capital to seal the deal with RBS and divest itself of its New Hampshire and Philadelphia branches to avoid exceeding regional market-share caps.
This, combined with the fact that TD Bank isn’t interested in acquiring Citizens’ Midwest subsidiary Charter One, led Klock to estimate a 50 percent chance that TD Bank will actually complete an acquisition of Citizens.
“Unless RBS thinks it’s the right price, it’s going to take a while,” Klock told the newspaper. “Even if they agreed to something, it could take nine to 12 months to get regulatory approval.”
“It’s a very big stake, and I think that stock will be sold down over a number of years,” Van Saun said. “We can do our part by improving the performance of Citizens, taking it public and getting some value for the asset. I think that will be good for RBS.”
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