Updated September 1 at 7:01pm

Citizens’ planned IPO way to help pay U.K. debt

By Rhonda Miller
PBN Staff Writer

Providence-based RBS Citizens Financial Group has chosen a new leader specifically to prepare for a partial IPO planned for 2015, replacing Chairman and CEO Ellen Alemany, named one of 10 CEOs to watch this year by American Banker.

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BANKING

Citizens’ planned IPO way to help pay U.K. debt

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Providence-based RBS Citizens Financial Group has chosen a new leader specifically to prepare for a partial IPO planned for 2015, replacing Chairman and CEO Ellen Alemany, named one of 10 CEOs to watch this year by American Banker.

Whether Alemany is truly ready for retirement, as was announced, remains to be seen. But the changes set in motion by the parent company, Royal Bank of Scotland PLC, are being closely watched by the Rhode Island financial community amid speculation about the bank’s future. At stake locally is the state’s ability to maintain, or even add to, jobs as a result of the public offering of a 25 percent stake in RBS Citizens, which employs 5,400 in Rhode Island.

“RBS took a bailout from the U.K. government and the bank is under great pressure from the government to … begin to repay the capital infusion,” said Robert Cusack, portfolio manager for Providence-based investment advisers WhaleRock Point Partners. “So the management of RBS has come up with a plan to do an [initial public offering] of stock for a portion of their holding in Citizens.”

The Financial Times on May 3 reported that, “Senior Conservative politicians have been stepping up efforts to prepare for a re-privatization of RBS … before the 2015 general election.”

According to Cusack, “These are political judgments, not business judgments. It’s all about the pressure. The elected officials in the U.K. want to be able to say to their constituents they’re pressing this private company to return all this taxpayer money that’s been invested in it.”

In 2008, the British government pumped $71 billion into the bank “to keep RBS afloat,” according to an Oct. 21, 2011 article in Dealbook, a financial news service produced by The New York Times.

“Just the announcement of the IPO took some of the pressure off RBS,” Cusack said. “RBS will wait as long as they can because they think the value of Citizens is rising. So they’re in no hurry to sell Citizens. In fact, I believe they really have no interest in selling Citizens.

“The valuation of banks is not back to what it was prior to the crisis. But they are up in value significantly from the bottom,” he said.

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