RBS accelerates retreat to UK market as it plans to cut its stake in US bank Citizens to less than 50%

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State-backed Royal Bank of Scotland has announced plans to reduce its stake in US bank Citizens by nearly a quarter as it continues to shift its focus back towards its UK retail and commercial market.

RBS, which is 80 per cent owed by the taxpayer, expects to raise more than $3billion (£2.2billion) from the sale of 115million shares plus a potential 17.25million shares in an over-allotment option.

The move would reduce RBS’ stake in the US lender to 46 per cent, with the bank aiming to reduce it to less than a third by the end of the year and expecting to complete it by late 2016.

Stake cut: The sale of more than $3bn shares in Citizens would reduce RBS’ stake in the US lender to 46%

RBS made another huge loss of £3.5billion in 2014 – the seventh consecutive year of losses – and said this partly came after it had to write down the value of Citizens by £4billion as it paid too much when it acquired it in 1988.

RBS sold a first slice of Citizens in September when it floated on the New York stock exchange. Citizens shares closed on Friday at $24.80 each, up 15 per cent from their IPO price of $21.50.

Citizens, headquartered in Providence, Rhode Island, was bought by RBS in 1988 and expanded with 25 acquisitions, including the $10.5billion purchase of Charter One in 2004.

RBS recently announced it would pull out of 25 of 38 countries across Europe, Asia and the Middle East to focus on the UK as it tries to return to profit.

The decision would lead to ‘substantial’ cuts among the 16,000 to 18,000 staff, RBS chief executive Ross McEwan said.

RBS losses also stem from recent charges for rigging the foreign exchange market and compensation for PPI mis-selling. 

It said it has set aside £2.2billion in ‘conduct and litigation’ charges, including £320million to pay further fines in the US for rigging foreign exchange markets and an extra £400million in the final quarter for PPI compensation.

Without the charges, the bank made a profit of £3.5billion, the biggest since 2010, and up from a loss of £7.5billion in 2013.

Shares in RBS closed 2.2p down, or 0.6 per cent, at 354.10p.