Analyst sees roadblocks ahead for TD Bank acquisition of Citizens

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. / 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. / BLOOMBERG FILE PHOTO/KELVIN MA

PROVIDENCE – A financial analyst who follows TD Bank Group believes that a possible bid by the Canadian bank for the Royal Bank of Scotland PLC’s U.S. subsidiary could face several roadblocks, the Philadelphia Business Journal reported Tuesday.

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.

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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.”

New RBS Citizens Chairman and CEO Bruce Van Saun told Providence Business News that the bank is looking at a date in the fourth quarter of 2014 for its announced 25 percent IPO, and that it will most likely be some time before the British government will be able to divest itself of its stake in RBS.

“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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