Bank in €8.5bn US deal

Royal Bank of Scotland is set to generate one quarter of its profits from the United States after agreeing a £5.8bn (€8.5bn) acquisition last night.

The deal for Charter One Financial was struck through the group’s US subsidiary Citizens, the second largest bank in New England.

Edinburgh-based RBS today said the tie-up, which it hopes to complete by the end of the year, would create an operation with “extensive coverage” across adjacent North Eastern and Mid Western states.

Citizens, which dates back to 1828 and became part of RBS in 1988, should become the country’s seventh largest bank by assets and deposits following the acquisition of Cleveland, Ohio-based Charter One.

RBS described the acquisition of Charter One as “low-risk” and said the two banks were seen as being a close fit in terms of geography and products.

Group chief executive Fred Goodwin said: “This is a highly logical and very natural acquisition for Citizens to make.

“As well as making good financial sense in its own right, it opens up another interesting range of options for Citizens to maintain their strong growth momentum.”

RBS said part of the financing for the acquisition would be achieved through a placing of new shares – a move set to raise around £2.5bn (€3.7bn).

Today’s deal – valued at $10.5bn (€8.6bn) – comes four years after RBS completed the largest acquisition in British banking history to buy NatWest for £21bn (€31bn). The group currently has a market value of £51bn (€75bn) and employs around 120,000 staff worldwide.

The acquisition extends Citizens into some densely populated areas in the Mid West, including the cities of Chicago, Detroit and Cleveland.

Charter One has a network of more than 600 branches, including 160 in supermarkets. Between 1993 and 2003, it increased pre-tax profits from $161m (€132m) to $924m (€761m).