Royal Bank of Scotland takes chunk of Mellon
Tuesday, 17 July 2001The Royal Bank of Scotland has taken another step into the US retail banking sector, buying assets from the Pennsylvania-based Mellon Financial Corp for $2.1 billion.
The bank, the second-biggest in Britain, which already owns Citizens Financial Group in the US, said it was augmenting that presence with operations that included retail, small business and commercial banking from Mellon.
To finance the deal, the bank will issue new shares worth some £2 billion, which would be placed on the market from today.
The deal comes as British banking giants are increasingly being forced to look overseas for acquisition targets. Last week, regulators blocked a domestic takeover of Abbey National by Lloyds TSB, signalling that big banks are dominant enough in Britain and need to look elsewhere to grow.
Mellon, a financial services group with 345 retail branches mostly in or around the state of Pennsylvania, has $13.4 billion of assets, which will increase the deposit base of Royal Bank's Citizens Financial Group by 54%.
The deal requires regulatory approval to go through, but there is believed to be little overlap between the two banks.
Royal Bank of Scotland said its half year performance was running ahead of market expectations and that interest margins for the six months ended June 30 had been flat. Falling interest rates were likely to cause 'some small erosion going forward,' the bank cautioned.
