New Wave of Mergers Sweeps Across US Banking Industry

Global Finance, Jul/Aug 2004

THE AMERICAS

Two new top-10 US banks were created by recent mergers, as the consolidation in the financial sector continued.

Royal Bank of Scotland extended its reach into the US Midwest, as its Providence, Rhode Island-based Citizens Financial Group agreed to acquire Cleveland, Ohio-based Charter One Financial for $10.5 billion in cash.

Meanwhile, Atlanta, Georgia-based SunTrust Banks agreed to merge with Memphis, Tennessee-based National Commerce Financial in a $7 billion cash-and-stock deal.

SunTrust won out in a bidding war for National Commerce with Cincinnati, Ohio-based Fifth Third Bancorp.

Citizens Financial, which will keep its corporate headquarters in Providence, will add major markets in six new states as a result of the Charter One acquisition. It will also expand its business in Massachusetts, Connecticut and Pennsylvania.

"This is a highly logical and very natural acquisition for Citizens to make," says Fred Goodwin, chief executive of RBS Group. "As well as making good financial sense in its own right, it opens up another interesting range of options for Citizens to maintain their strong growth momentum," he says.

This will be Citizens' 26th acquisition since 1988 and will increase the share of RBS's profits generated in the US to 25% of the total. Charter One also has grown significantly through acquisitions as well as aggressive retail expansion.

Charter One will keep its national bank charter and continue operations based in Cleveland. Charles John Koch will continue to serve as chairman of Charter One and was named a vice-chairman of Citizens Financial.