Citizens Bank owner prepares to go public

Citizens Bank owner Citizens Financial Group Inc., of Providence, R.I., in its Form S-1 initial public share offering (IPO) documents as amended Sept. 8 (read it and more recent updates here), hopes to sell the public at least 140 million shares at around $24 a share, a little above the company's tangible book value, and a discount to the typical U.S. large regional bank (which trades at about 40% over book), writes Terry McEvoy, an analyst at the brokerage Stern Agee, in a report to clients today.

The cash will go, not to Citizens, but to its recent owner, Royal Bank of Scotland, which is trying to raise cash and cut expenses, McEvoy notes. Once it goes public, the company will trade under the ticker CFG. Citizens owns the former PSFS, Girard and Mellon Bank branches in the Philadelphia area, where it rivals PNC, TD and market-leader Wells Fargo for consumer and business accounts..

As part of RBS, "Citizens' sub-par operating performance went either unnoticed or was acceptable," and the company "poorly executed" its Midwest expansion since buying Charter One Bank in 2004, McEvoy writes. Under new boss Bruce Van Saun (who I profiled here last year), McEvoy adds, "the company's commercial banking business is producing solid results, whereas additional resources and management focus will be needed to improve the consumer platform, in our view."  

Citizens is less profitable than other big banks but plans to boost mortgage lending, wealth management and investment banking and corporate cash management, and to expand its already large auto-lending buisness, as an independent company in an effort to push profits higher, writes McEvoy. The bank is also ramping up its student-loan sales.

Locally, Citizens directors include William Hankowksky, who as boss at Liberty Property Trust is landlord and developer to Comcast Corp.'s Philadelphia headquarters and a national developer of high-end warehouses. The bank's Pennsylvania boss is veteran Philadelphia banker and civic booster Daniel K. Fitzpatrick.

In all, the bank, based in Providence, Rhode Island, operates 1,230 branches in 11 Northeast and Midwest states, with about $130 billion in consumer and business loans and other assets. That's #13 in the U.S., but less than the $170 billion the company controlled before the 2008 financial crisis, which forced cutbacks at its owner, Royal Bank of Scotland, and the sales of Citizens-owned operations in Chicago and elsewhere. Citizens shrank during the recession while rival PNC Financial Services Group, which avoided the worst of the crisis, was able to buy assets cheap and expand.