Royal Bank of Scotland (RBS) said yesterday it saw fresh opportunities for further acquisitions in the fragmented US banking market following its $10.5 billion (€8.6 billion) acquisition of Charter One, announced late on Tuesday.
RBS has become the world's fifth biggest bank by market value through acquisitions and had been scouring the US for potential deals for the past year.
Mr Fred Goodwin, chief executive, said yesterday that Charter One gave RBS "lots of optionality for future acquisitions" as it takes the bank into mid-western US cities such as Cleveland and Detroit.
The acquisition of Charter One will make RBS, which owns Ulster Bank and First Active in Ireland, one of the 10 largest banks in the US by assets and deposits, and Mr Goodwin said the deal put RBS "in the survivor pool" as the fragmented US banking market consolidates.
He said a gap would open up between "those who make Top 10 and those who don't".
However, news that RBS will offer £2.5 billion (€3.6 billion) in shares to help pay for Charter sent its shares down 5.63 per cent to 1625p.
In early New York trading Charter shares had jumped 22 per cent to $43.88, compared with the $44.50 a share that RBS is paying.
London analysts generally welcomed the move although some questioned whether the price was too high at about 15.1 times Charter's expected after-tax earnings for 2004.
RBS expects to make cost savings of $185 million in three years mainly by transferring Charter's IT platform onto that of Citizens, its US division.
However, RBS has made clear that no branches will close as a result of the deal and there will be no disposals.
Citizens expects to deliver transaction benefits that will increase profits before tax by $407 million in three years.
The transaction is expected to close in the fourth quarter of 2004.
RBS said that Charter One, which reported pre-tax profits of $924 million in 2003, offered similar retail banking products to those provided by Citizens.
Mr Goodwin said the deal was "low risk" as Charter One did not take Citizens into new areas and had already been growing well.
"This is not a fixer-up. The business has been growing well," he said.
