Citizens Financial IPO Priced Below Range, Raises $3 Bln

(RTTNews) - Commercial bank holding company Citizens Financial Group, Inc. (CFG), owned by British lender Royal Bank of Scotland Group PLC (RBS, RBS.L), priced its initial public offering of 140 million shares at $21.50 per share, raising gross proceeds of about $3 billion. The pricing was below the company's estimated range of $23 to $25 per share.

The IPO immediately values Citizens Financial at about $12 billion. Citizens Financial shares of common stock are expected to begin trading on the New York Stock Exchange under the ticker symbol 'CFG' on Wednesday.

The investor family was critical about the prospects of the IPO amid the slow growth of the U.S. economy, including the Northeast and mid-Atlantic region, where Citizens Financial primarily operates.

RBS was forced to cut price due to the lack of demand amid market skepticism about the overall lackluster performance by other large financial sector IPOs and a mixed performance of bank stocks in 2014. However, the year was strong for IPO's from other sectors.

The muted response to the Citizens Financial IPO comes on the back of last weeks highly successful and historic $25 billion IPO of Chinese e-commerce giant Alibaba Group Holding Ltd. (BABA), which also listed on the NYSE.

However, the Citizens Financial IPO is the largest among US banks since Goldman Sachs Group, Inc.'s (GS) market debut in 1999.

According to Dealogic, it is also the second-largest U.S. IPO this year after Alibaba and the third-largest bank IPO in nearly two decades. It trails only CIT Group Inc.'s (CIT) 2002 IPO that raised $4.9 billion and Goldman Sachs' $3.7 billion IPO in 1999.

Morgan Stanley & Co. and Goldman, Sachs & Co, are acting as joint global coordinators, while J.P. Morgan Securities is acting as joint book-running manager for this offering.

The British-owned American bank said the shares of common stock were offered by the selling stockholders, and that it will not receive any of the proceeds from the sale. The selling stockholders have also granted the underwriters a 30-day option to purchase up to an additional 21.0 million shares to cover over-allotments, if any.

Providence, Rhode Island-based Citizens Financial is the 13th largest retail bank holding company in the U.S., with $130.3 billion of total assets as of June 30, 2014 as well as nearly 1,230 branches and over 3,215 ATMs across 11 Northeast and Midwest states in the U.S. The company generated revenues of $5.0 billion for the twelve months ended June 30, 2014.

RBS said last year that it would sell 20 to 25 percent of Citizens by the end of 2014 through an U.S. IPO, and planned to fully divest the business by the end of 2016. This will pave the way for the return of billions of dollars of capital to the UK regulators that RBS received in a bailout in 2008.

RBS bought the Citizens in 1988 for $440 million to expand operations around the globe, but has been under pressure from U.K. regulators to sell its foreign holdings and non-core assets ever since it was bailed out by the UK government. RBS had pledged to list Citizens Financial and refocus on its British operations.

Edinburgh, Scotland-based RBS was initially seeking to raise at least $10 billion from the planned IPO of Citizens after failing to sell the unit outright to Japanese lender Sumitomo Mitsui Financial Group Inc. (SMFG).

The move to spin-off Citizens into a standalone company through an IPO came as part of a broader effort by its owner RBS, 81 percent owned by the British government, to bolster its capital in the event of another financial crisis amid pressure from British regulators. RBS was once a failing bank that was bailed using nearly $70 billion of British taxpayers money.

RBS closed Tuesday's regular trading session at $11.69, down $0.05 or 0.43% on a volume of 0.67 million shares.