Shares of Citizens' Financial rise 2% on first morning of trading

24th Sep 2014 15:23

Shares in Citizens Financial moved higher in early trading on Wednesday, after the regional bank's initial public offer (IPO) by parent RBS had hitherto received a lukewarm reception.Under their new ticker symbol "CFG", the shares hit $22.25 in choppy early trading before retreating to around $22 by 11:00 EST.The IPO saw RBS float 140m Citizens shares for $21.50 each, giving the Rhode Island-headquartered business a $12bn market capitalisation.This was below its hoped-for range of between $23 and $25 a share.Although the US banking sector's profits are back at their highest level since the crisis, Citizens' capital levels and governance had been criticised by the Federal Reserve in its yearly stress tests earlier in the year.Investors were also doubtful whether management's stated profitability targets could actually be met and balked at the original price offered.Targets included a near-doubling of the group's return on equity, a key measure of profitability, in just three years."This does appear very ambitious, given the difficult backdrop," conceded analyst Garry White at Charles Stanley. "Also, when the owner of an asset, in this case RBS, is a forced seller, investors are also likely to pressure for the shares to be sold relatively cheap."RBS is initially selling 25% of Citizens, raising $3bn, but a greenshoe option for 15% more shares could see RBS raise a total of $3.5bn for selling a 28.75% stake.Althogh the reduction in the IPO pricing was another sign that investors are getting more cautious, White said the flotation was still good news for embattled RBS shareholders."The sale will boost RBS's capital buffers significantly, and allow management to focus on the UK market, helping with its core strategic aims."