Cit­i­group share­hold­ers could see a wind­fall Royal Bank buys City Na­tional for $5.4 bil­lion

The Pak Banker - - FRONT PAGE -

Inc C +1.01%'s share­hold­ers could see a wind­fall if the bank sells its U.S. sub­prime lend­ing business, pre­dicts one Wall Street an­a­lyst. Mor­gan Stan­ley's Betsy Graseck says the bank is "well po­si­tioned" for the Fed­eral Re­serve's stress tests this spring. She es­ti­mates that Cit­i­group has asked for a div­i­dend in­crease of four cents a share and for per­mis­sion to buy back $4 bil­lion in stock. The buy­back ask could be even higher if Cit­i­group uses the pro­ceeds from the pend­ing sale of the sub­prime lend­ing business, OneMain, says Ms. Graseck. Cit­i­group de­clined to com­ment. The me­dia has pre­vi­ously re­ported that OneMain could fetch more than $4 bil­lion. If a sale goes through, Cit­i­group could ask for an in­cre­men­tal buy­back of up to $3.2 bil­lion, she posits. There is a prece­dent for a move like that: in 2013 the Fed ap­proved Cap­i­tal One's re­quest to buy back $1 bil­lion in shares cap­i­tal fol­low­ing the sale of its Best Buy port­fo­lio.

LOS AN­GE­LES: Royal Bank of Canada agreed to buy City Na­tional Corp for about $5.4 bil­lion in cash and stock in its big­gest takeover ever to ex­pand sales to wealthy U.S. res­i­dents. Royal Bank will pay about $93.80 per share for Los An­ge­les-based City Na­tional, or 26 per­cent more than yes­ter­day's clos­ing price, the buyer said to­day in a state­ment. RBC, Canada's sec­ond-big­gest lender by as­sets, will pay about $47.25 in cash and 0.7489 of a share for each of City Na­tional's shares.

The takeover marks an ex­pan­sion of U.S. lend­ing un­der David McKay, who took over as chief ex­ec­u­tive of­fi­cer in Au­gust. RBC spent more than $4.6 bil­lion over a decade try­ing to make in­roads into U.S. re­tail bank­ing start­ing with its 2001 pur­chase of Cen­tura Bank. The firm cut its losses in March 2012 when it sold its money-los­ing North Carolina-based RBC Bank and credit-card as­sets to PNC Fi­nan­cial Ser­vices Group Inc. for $3.62 bil­lion.

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