Scots and Irish to merge US retail banking
Tuesday 19 December 1995
The Royal Bank of Scotland and Bank of Ireland announced the merger of their US community retail banks into an operation with combined assets worth pounds 9.3bn ($14bn).
Bank of Ireland's First Holdings Inc, which owns First New Hampshire Bank, is to be rolled into the bigger Citizens' Financial Group of the Royal Bank of Scotland.
The merger is the latest move in a surge of banking consolidations in the US as regional banks seek cost advantages in size.
The terms of the merger value the enlarged New England operation, which will continue under the Citizens name, at $1.85bn. It will create the third- largest commercial bank holding company in New England with 222 branches, focusing on consumer banking and lending to small- and medium- sized businesses.
"I think it is a very good deal for both banks. It makes a lot of sense to get together in what is effectively the same banking market. I reckon you could get rid of 12 per cent of the combined bank's costs, the equivalent of 40 per cent of the Bank of New Hampshire's cost base, just by centralising everything," said Hugh Pye, analyst at BZW.
Royal Bank of Scotland will hold 76.5 percent of the enlarged operation. Bank of Ireland will receive stock representing 23.5 per cent of the merged entity valued at $435m together with cash and loan notes with an estimated value of $220m which includes $35m in respect of specified tax losses carried forward. It will also receive up to $26m deferred cash consideration if other tax losses are realised in the future and will retain ownership of Bank Ireland First Financial, a small leasing subsidiary which has a book value of $24m. Bank of Ireland will also nominate two members to the board of Citizens and will be represented on board committees.
Citizens Financial Group reported pre-tax profit in the year to September of $170m, and Bank of Ireland First Holdings profits of $32m in the six months to September.
The earnings of the enlarged bank will be substantially increased by synergy benefits, mainly cost savings as the support functions of Citizens and First Holdings are combined in areas such as head office and technology. Additional benefits will come from sharing product development, marketing expenditure and technology investment.
Mr Pye added: "I think there is a good chance of the combined bank increasing revenues by 5 per cent, getting pre-tax profits up by $80m, which would add between 3 and 5 per cent to the earnings per share of both banks. Together the banks will enjoy a very strong market share, either to carry on with or to sell at a later stage."
George Mathewson, Royal Bank chief executive, said: "This is a good deal. It will bring strategic and financial benefits to both of us. It will increase our earnings per share without the need to add new capital."
Is your name now 'banned' in Saudi Arabia?
Oscar Pistorius trial: Photographs of Paralympian splattered in blood after Reeva Steenkamp shooting shown in court
Seth Rogen compiles list of all the celebrities he’s got high with
Missing Malaysia Airlines Flight MH370: Satellite ‘pings sent five hours after contact was lost' the only clue in hunt for £160m plane
Missing Malaysia Airlines Flight MH370: New radar evidence suggests missing plane may have been hijacked
Katie Hopkins continues campaign to become Britain's most hated talking head with poorly timed Bob Crow tweet
No EU referendum under Labour: Ed Miliband to reveal that vote on membership is ‘unlikely’ in next Parliament if party wins power
Grace Dent: Who cares if she spells it Barraco Barner? Gemma Worrall is more employable than some bookish arts graduate
Europeans have ‘got whiter’ due to natural selection in past 5,000 years, scientists say
Fracking is turning the US into a bigger oil producer than Saudi Arabia
The rise of Ukip: Study warns Labour that Eurosceptic party's electoral base now 'more working class than any of the main parties'
- 1 Is your name now 'banned' in Saudi Arabia?
- 2 Best films on Netflix: 32 movies that will put an end to your scrolling
- 3 Saving a crushed egg with tape and glue: Why you should care about the kakapo
- 4 Istanbul protesters take 'Ellen selfie' from the back of a police van
- 5 Lady Gaga has struggled with eating disorders in the past, so it's indefensible that she's glamourising bulimia in her SXSW set
iJobs Money & Business
£35000 - £43000 per annum + Bonus and Benefits: Harrington Starr: A global lea...
£50000 - £60000 per annum: Harrington Starr: Linux Systems Administrator - UNI...
£32000 - £36000 per annum + generous benefits: Pro-Recruitment Group: * TAX * ...
£37000 - £40000 per annum + £20000 benefits package: Pro-Recruitment Group: **...