RBS's Citizens Financial IPO 'Signifies The End Of The Big Bank Model,' Says Expert
Yesterday, the Royal Bank of Scotland Group plc (LON: RBS) revealed more details about its upcoming spinoff.
The IPO, which will center on RBS's US retail banking arm Citizens Financial, is expected to raise upwards of at least $3 billion with a total market capitalization above $13 billion, according to The Wall Street Journal. Renaissance Capital reports this would make Citizens Financial the largest bank IPO in five years.
Interestingly, not everybody is excited about RBS's plans.
In a note to Benzinga, Ryan Mendy, COO of The Edge Consulting Group, says he believes they signify "the end of the 'big bank model.'"
Here are the rest of his comments:
“Due to an explosion in regulation and some major hiccups in equity market performance, some of the most visible financial institutions are set to spin off their commercial banking, investment banking and money management businesses. We're now seeing this with RBS.
"This is the most logical way these institutions can boost overall performance for shareholders. We are already starting to see signs of movement within the large banks. Citigroup for example, has recently put its Japanese retail bank up for sale, and RBS has today started the IPO process for its US bank, Citizens Financial Group, which will value the subsidiary at up to £9bn.
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"Separating commercial banking, investment banking and/or investment management activities from these large financial institutions would be the most logical way these institutions could boost overall performance for shareholders. It's the end of the ‘big bank model' –- they have to break up."
Disclosure: At the time of this writing, Jake Mann had no position in the equities mentioned in this report.
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