Minneapolis-based lender’s $315 million deal for RBS Citizens branches signifies growth in a hypercompetitive market.
U.S. Bancorp is buying the Chicago branch network of RBS Citizens Financial Group for about $315 million, as the Minneapolis-based lender doubles its footprint in the fiercely competitive market.
The acquisition, expected to close by midsummer, vaults U.S. Bank into among the top 10 banks in the Chicago-area market.
The purchase includes the 94 retail branches of RBS Citizens’ Charter One Bank franchise, as well as its small-business operations and certain middle-market relationships, U.S. Bank said Tuesday. U.S. Bank is getting 800 employees, deposits of $5.3 billion and $1.1 billion in loans.
“As you look at our distribution in Chicago, we have not had the depth of distribution that we would like in a market of that size,” said John Elmore, vice chairman of community banking and branch delivery for U.S. Bank. “That’s why this is such an exciting opportunity for us.”
RBS Citizens said it’s carving off its Chicago branch operations as it shifts its focus to larger business customers.
In a note to clients Tuesday, David George, an analyst at Robert W. Baird & Co. Inc., called the purchase “small but strategic.” The purchase price was less than what had been expected, he said.
U.S. Bank currently has 90 retail branches in the Chicago area and more than 1,800 employees. The lender bought the naming rights to a 40-story office tower at 190 S. LaSalle St. in downtown Chicago and plans to have the U.S. Bank sign up on the building sometime this year. It’s keeping existing space in the Rookery, a well-known historic building downtown.
While U.S. Bank has been in Chicago for years, its business there really took off after it bought Park National Bank in a 2009 deal with the Federal Deposit Insurance Corp.
Middle-market commercial customers, or companies with revenue of $20 million to $500 million, have produced double-digit growth in the past two years, said Marsha Cruzan, U.S. Bank’s market president for Chicago. U.S. Bank has seen 25 percent growth in small business lending to companies with sales under $20 million.
Elmore said there may be some overlap between Charter One and U.S. Bank branches that are near each other, but U.S. Bank’s goal is to maintain a broad network of branches in Chicago.
“We’re really just starting the integration process now,” Elmore said. “All of those details will be determined throughout that process.”
The Chicago area has a reputation as a market with too many banks that is ripe for consolidation. The area is dominated by JPMorgan Chase & Co. which has nearly 25 percent market share by deposits. No. 2 is BMO Harris Bank with 12 percent.
RBS Citizens Financial Group is a $120 billion bank based in Providence, R.I. It operates under the Citizens Bank brand in the northeast, and under the Charter One brand in Illinois, Michigan and Ohio.
RBS said it is selling the Chicago branches to focus on core Citizens Bank and Charter One markets where it has better growth prospects. It’s targeting Ohio and Michigan, New England, the mid-Atlantic, commercial banking and its national platforms including franchise finance and health care.
In an interview, Robert Matthews, vice chairman for commercial banking, emphasized that RBS Citizens is not pulling out of Chicago and is just prioritizing away from business lines that depend heavily on bricks and mortar branches. It will continue offering consumer loans such as residential mortgages and auto loans, and offer a range of commercial loans and services.
“One of the things we’ve been investing heavily in is building a capital markets capability to help companies raise capital,” Matthews said. “We’ve seen some very notable growth.”
Jennifer Bjorhus • 612-673-4683