Royal Bank of Scotland is to buy the retail arm of US banking group Mellon Financial for $2.1 billion in cash.
Royal Bank, the parent company of Ulster Bank, unveiled a $2.79 billion share placing to fund the deal - helping send its shares down 2.4 per cent to £14.93 in early trade in London this morning.It said the issue was designed to maintain the bank's capital ratios.
The acquisition is expected to be completed in the fourth quarter of the year.
Royal Bank also said half-year underlying earnings were running ahead of market expectations and that interest margins were largely unchanged, though falling interest rates were likely to cause "some small erosion going forward".
Chief Executive Mr Fred Goodwin said Mellon would give Royal Bank a strong position in Pennsylvania, expanding its East Coast presence - and that it was on the lookout for more US deals.
Mellon's retail, small business and middle market commercial banking businesses will give Royal Bank a presence in Pennsylvania, New Jersey and Delaware, with 345 branches in total. The business ranks third in terms of deposits in Philadelphia and Pittsburgh.
The deal marks Royal Bank's first major acquisition since it took over NatWest in the last year after a fierce bid battle with rival Bank of Scotland.
It has set itself apart from some British rivals by pursuing an international expansion strategy, while others - such as Lloyds TSB Group - have focused almost entirely on the Britishmarket.