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The sale of Citizens Financial Group, Citizens Bank's parent company and one of the largest banking institutions in New England, had been feared as late as Monday while European regulators considered how to break up RBS into smaller pieces. The breakup is part of a $40 billion bailout plan, the second for RBS following last year's financial panic.
"Today's announcement once again affirms that (Citizens) is a valued part of the RBS Group," Ellen Alemany, chairman and chief executive of Citizens Financial Group, said in a statement Tuesday.
Citizens Financial Group has a $153 billion in assets and, through various subsidiaries, runs 1,480 branches in 12 states. The company traces its roots to 1871 and became part of the Royal Bank of Scotland in 1988.
RBS, which nearly collapsed during last year's financial panic, had been ordered by British government officials to sell the Providence-based Citizens, which has more than a dozen branches in this area and 23,000 employees throughout the Northeast. But the government rescinded the ordered sale after RBS officials balked, according to news accounts.
Instead, RBS will be forced to sell within four years more than 300 branches in the United Kingdom, including NatWest offices in Scotland, along with its RBS Insurance unit, the card-payment business Global Merchant Services and an interest in RBS Sempra Commodities, one of the largest energy-trading companies in North America.
The businesses to be sold off contributed about $1.8 billion of operating profit last year and $9.4 billion of revenue. RBS has been told to time divestments to maximize value.
The move gave the British government 84 percent ownership of RBS, which reported losses totaling more than $1.6 billion for the first half of the year.
The breakup of RBS left U.S. regulators in an interesting position, according to analyst Lita Epstein, writing for the online site Daily Finance. Both Fed Chairman Ben Bernanke and Treasury Secretary Timothy Geithner support the idea of maintaining the size of so-called "too big to fail" banks, she said, their argument being that financial institutions must be larger today to compete on the world stage with other banking behemoths.
But is this argument still viable as other big banks are being broken up?
"Britain took the lead in bailing out the big banks and the U.S. followed. It's now taking the lead in breaking up the big banks," she wrote. "Let's hope the U.S. decides to follow again."
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