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RBS cuts price of US bank flotation

Royal Bank of Scotland last night priced the shares in Citizens Financial at $21.50, lower than the expected $23 to $25 range.

The cut  followed comments earlier in the day from investors who believed today’s flotation of the Rhode Island based bank in New York was over-priced.

RBS is selling 140 million shares representing 25% of Citizens. It is now expected to raise $3 billion (£1.8 bn), rather than $3.5 bn at the higher price, which it will use to strengthen its balance sheet.

It is estimated that the deal will add two percentage points to RBS’s capital ratio – a measure of its reserves – bringing it comfortably within the requirements of new international regulations.

The sale is the biggest initial public offering by a US bank since Goldman Sachs in 1999 and RBS expects to fully exit Citizens by 2016. It acquired the bank in 1988 for $440m so today’s sale represents a substantial gain.

The offering is already discounted at one times net tangible book value, against an average of 1.9 for other banks.

Bruce Van Saun, the former RBS finance director and now chief executive of Citizens, is expected to pocket $5m.

It has 18,400 employees and $126.9 billion of total assets.

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