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