Royal Bank pays dollars 95m for New England chain

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The Independent Online
ROYAL Bank of Scotland yesterday took a further step towards its target of generating a tenth of its earnings in the US with the acquisition of a Boston-based banking group, writes Heather Connon.

Royal is paying dollars 95m ( pounds 62m) for Boston Five, a savings bank with 25 branches in Massachusetts. Royal's existing US subsidiary, Citizens, operates in New Jersey. The deal will increase the number of US branches to 85 and boost Citizens' total assets from dollars 4.6bn to dollars 6.4bn, making it the sixth-largest banking group in New England.

The purchase will be financed by Citizens, which intends to raise funds for it 'at the appropriate time'. That could take the form of a convertible or loan note issue, but is unlikely to take place before Royal's year-end in September. The bulk of Boston Five's business is in domestic mortgages, which accounted for dollars 937m of its dollars 1.4bn loan book at the end of October. Its focus on the retail market means it has suffered less than some of its peers from the collapse in the local property market, which has sent some banks into liquidation.

Citizens also concentrates on retail business and has remained profitable throughout the slump. In the year to September it contributed pounds 35.5m to operating profit, up from pounds 27.7m the previous year, although it had to provide pounds 18.6m for bad debts.

John Barclay, deputy chief executive, said it was a 'small but significant step' towards its goal of increasing US profit to 10 per cent of the total by 1997. He added that the group was considering other opportunities.

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