RBS buys Mellon's retail arm for £1.5bn

Royal Bank of Scotland, the UK's second-largest bank, is today expected to unveil the $2.2bn (£1.5bn) purchase of the retail banking arm of the US financial services giant Mellon Financial Corporation.

Mellon's board met yesterday to rubber-stamp the deal, which will bolster RBS's Citizens Financial operations in the US. The business being acquired from Mellon is to be integrated into Citizens, in which RBS bought a 77 per cent stake in 1996, acquiring the rest two years later.

Fred Goodwin, RBS's chief executive, has repeatedly indicated that he sees scope for expansion in the US, although he said in March that RBS might participate in "mercy killings" of small, struggling UK banks. As a member of the so-called Big Four banks in the UK, RBS was in effect prohibited from doing large domestic deals following the Government's block last week on Lloyds TSB's proposed acquisition of Abbey National.