Scots and Irish to merge US retail banking

JOHN EISENHAMMER

Financial Editor

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."

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee