LONDON Royal Bank of Scotland (RBS.L) should consider the future of its U.S. business Citizens and reduce the size of its investment bank, the agency in charge of Britain's stake in the bank said.
"I would confirm that among the strategic issues we have discussed with management are the U.S. operations and the investment bank," said Jim O'Neil, chief executive of UK Financial Investments, which oversees the government's 82 percent stake in RBS.
"The investment bank shape and size ultimately should be smaller than it is today," O'Neil told the Parliamentary Commission on Banking Standards on Tuesday.
The future of Citizens has been under scrutiny as it does not fit with RBS's narrowed focus on its home market, although Chief Executive Stephen Hester was expected to try to delay any sale until a turnaround of the business was more advanced.
Citizens and its subsidiaries, which operate more than 1,500 branches across 12 states and employ 20,900 staff, could fetch more than 9 billion pounds ($14 billion), analysts have estimated.
Hester did not rule out a sale when asked about Citizens last month, saying his focus was on improving its profitability.
"Plan A is to run the recovered group (Citizens) in the way we have set out with the rationale we have set out. But if someone comes along with a change in circumstances or a plan that makes more actual sense, we will always look at it," he said at the time. ($1 = 0.6237 pound)
(Reporting by Matt Scuffham; Additional reporting by Steve Slater)