(Refiles to fix typo in headline)
* RBS says still planning for Citizens flotation
* Sumitomo declines comment
* RBS wants to sell Citizens to bolster capital position
By Matt Scuffham and Taiga Uranaka
LONDON/TOKYO, March 24 Royal Bank of Scotland
has had contact regarding the possible sale of its U.S.
retail business Citizens with Sumitomo Mitsui Financial Group
, while Mitsubishi UFJ Financial Group has also
considered a bid, people with knowledge of the matter said.
RBS, which is 81 percent owned by the British government,
said in November it would speed up a planned stock market
flotation of Citizens in New York, aiming to start the process
in the second half of 2014 and to fully sell the business by the
end of 2016.
RBS said on Monday that plan remained unchanged and declined
to comment on whether it had held talks with Sumitomo. Chief
Executive Ross McEwan had previously indicated that, while the
bank was planning for an initial public offering (IPO), it was
open to approaches from potential buyers.
RBS shares rose 1.5 percent on Tuesday.
SMFG and MUFG both declined to comment in Tokyo. The talks
with SMFG were first reported by the Wall Street Journal.
Both MUFG, Japan's largest banking group, and SMFG, the No.
3 banking group, have signalled an openness to consider a bid
for Citizens, but there are significant hurdles in both cases,
according to people with direct knowledge of the situation.
Some executives within SMFG support consideration of a U.S.
acquisition that would boost the bank's operations in the
world's largest economy, while others are cautious because of
the likely price of an acquisition, the people said.
The cautious camp has also argued that SMFG would be better
off focusing on building up its Asian operations outside Japan,
where the prospect for future growth is better and an
acquisition could be an easier strategic fit, people with
knowledge of the deliberations said.
MUFG is still in the hunt to acquire a bank or branch
network to reach its goal of becoming one of the 10 largest U.S.
banks by 2016, a senior bank official said in January.
But a bid for Citizens would come at time when MUFG has
already been stretched by the challenge of integrating
Thailand's Bank of Ayudhya. MUFG bought a 72 percent stake in
the Thai bank in December for just over $5 billion.
An acquisition of Citizens by MUFG might also prove a
challenge to integrate because MUFG's existing U.S. banking
operation is based on the West Coast, people familiar with the
matter said. Rhode Island-based Citizens has about 1,400
branches centred on the East Coast and the Midwest.
MUFG has the biggest overseas operations among Japan's
banks. In 2008, it bought out UnionBanCal Corp, the holding
company for California-based UnionBank, and paid $9 billion for
a 20 percent stake in Morgan Stanley.
In 2010, it acquired a $6.4 billion project-financing loan
book from Royal Bank of Scotland.
RBS is under pressure to bolster its capital position which
has come under strain following a 3 billion pound ($5
billion)charge for past misdeeds which it announced in January.
($1 = 0.6065 British Pounds)
(Additonal reporting by Taro Fuse; Editing by David Holmes and