RBS's Citizens Financial makes a tepid market debut

Wed Sep 24, 2014 4:28pm EDT
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By Matt Scuffham and Amrutha Gayathri

(Reuters) - Shares of Citizens Financial Group Inc (CFG.N: Quote), the U.S. unit of Royal Bank of Scotland Group Plc (RBS.L: Quote), rose as much as 8 percent in their market debut, valuing the lender at about $13 billion in the biggest U.S. bank IPO since the financial crisis.

The offering, which raised $3.01 billion for RBS, is also the second biggest in the United States this year after Alibaba Group Holding Ltd's (BABA.N: Quote) $25 billion IPO last week.

Citizens' shares closed up 7.3 percent at $23.08, underscoring tepid appetite for offerings by financial firms in an otherwise hot U.S. IPO market. Alibaba's stock popped 38 percent on its first day.

RBS, which is 80 percent owned by the British government, had originally planned to sell the shares at between $23 and $25, but ended up selling them for $21.50 each.

The bank was forced to cut the price due to investor uncertainty over Citizens' ability to meet profitability targets, analysts said.

RBS, whose stake in the 186-year-old Rhode Island-based bank will drop to 75 percent after the IPO, has said it intends to sell all of its stake in Citizens by 2016.

"RBS is still sitting on about 75 percent of the company, which implies a huge overhang," said Josef Schuster, founder of IPOX Schuster, a Chicago-based IPO research firm.

"Companies with an overhang indicate that the initial shareholders are going to get out sooner or later."   Continued...

A sign is seen outside a Royal Bank of Scotland building in central London January 28, 2014. REUTERS/Paul Hackett