The sale of Citizens Financial Group shares later this year is likely to rank among the largest initial public stock offerings of 2014 and to become the biggest commercial bank IPO in more than a decade, according to financial analysts.
Citizens, based in Providence, filed paperwork Monday with the Securities and Exchange Commission to sell shares in public stock markets and spin off from its beleaguered parent company, the Royal Bank of Scotland. Citizens has not specified how many shares it plans to offer or the expected price per share.
But RBS, based in Edinburgh, needs money from the sale to help repay British taxpayers for a $70 billion bailout of the bank during the global financial crisis of a few years ago.
With $122 billion in assets and 1,370 branches, Citizens dwarfs all other commercial banks that have launched an IPO offering since at least 2000, according to SNL Financial, a financial research firm in Virginia.
The largest bank to launch an IPO since SNL began keeping comprehensive records more than a decade ago involved First Republic Bank of San Francisco, which had $21.9 billion in assets when it completed its public offering in 2010. The bank, formerly a unit of Bank of America, raised more than $322 million in the stock sale.
Citizens, the 13th largest bank in the country, plans to sell about 25 percent of the company to shareholders this year and sell the rest by 2016. In SEC documents, Citizens said it anticipates raising $100 million in this offering, but that is likely a placeholder used to calculate filing fees. Renaissance Capital, a Greenwich, Conn., investment advisory firm specializing in IPOs, estimates that Citizens would raise $3 billion.
Several other Massachusetts banks have filed for IPOs this year, but most are small, mutually owned community banks converting to public companies.
Despite the IPO rush by banks and other companies, investors are getting skittish, said Kathleen Smith, a principal with Renaissance.
Earlier this month, a Cambridge biotechnology company that is developing treatment for bone loss disease withdrew its IPO, citing poor market conditions. A Burlington life sciences company raised half what it was seeking by selling shares.
“The IPO market has become challenging for all issuers, not just financial,” Smith said in a statement. “Over half the IPOs priced so far this year are trading below their IPO prices.”
Citizens acknowledged in its filings that it faces challenges in getting a top price. In March, the bank failed a test aimed at measuring how well financial institutions could weather a severe economic crisis.
In its review of Citizens, the Federal Reserve Board found that the bank suffered from serious shortcomings in how it set aside money to get through deep recessions and that it had weak internal controls.
“If the bank hasn’t gotten a clean bill of health, it’s going to affect the price,” said Richard Bove, an analyst with Rafferty Capital Markets, based in Garden City, N.Y. “It’s a significant negative.”
While Citizens has said that it is well-capitalized and its extensive branch network in the Northeast should attract investors, the bank added there are potential costs to separating from RBS. The bank will likely have to spend $51 million to rebrand and become a stand-alone company, a process it says could also drive away customers. The bank could also receive fewer referrals from RBS, Citizens said in its SEC filings.
The Royal Bank of Scotland has owned Citizens since 1988, when it was a small Rhode Island institution. RBS saw Citizens as a way to get a foothold into the lucrative US market and helped finance its aggressive push into Massachusetts, Pennsylvania, and the Midwest.
Citizens, however, has been shrinking in deposits in recent years, even as many other banks have grown. In the past, Citizens downplayed its parentage across the Atlantic and emphasized that decisions were made locally. But that became more difficult after British taxpayers took over majority ownership following the bailout.Deirdre Fernandes can be reached at deirdre.fernandes@ globe.com. Follow her on Twitter @fernandesglobe.