The biggest US bank listing since the financial crisis got a lukewarm reception from investors, forcing Royal Bank of Scotland to cut the price of shares sold in Citizens Financial.

Shares were sold at $21.50 apiece in the initial public offering in New York, lower than expected and valuing Citizens at $12 billion.

The offer raised about $3 billion for British state-backed RBS, making it the second biggest in the United States this year, after Alibaba raised $21.8 billion last week.

RBS had originally planned to sell shares in its US bank at between $23 and $25. It cut the price due to investor uncertainty on whether the bank could meet its profitability targets and a more lacklustre appetite for financial stocks than other sectors, analysts said.

RBS shares fell 1.1 per cent to 354p in early trade, underperforming the European banking index.

"The reduced sale proceeds may take some of the froth out of the RBS 'bull' case, but perhaps the bigger picture is that an anticipated capital uplift of 2-2.5 per cent should still follow upon deconsolidation," Ian Gordon, an analyst at Investec, said.

RBS, which had 100 per cent-owned Citizens, sold 140 million shares and could sell 21 million more in an over-allotment option, which would lift its proceeds to $3.5 billion and see it sell 29 per cent of the US business.

The bank, which is 80 per cent-owned by the British government, is hiving off the 186-year-old Rhode Island-based business as it is under pressure from regulators and politicians to bolster its capital and focus on lending to UK households and businesses. RBS intends to fully sell Citizens by the end of 2016. It was ordered to sell by European regulators as a cost of taking £45 billion of taxpayer rescue cash in 2008.

“Selling Citizens will significantly improve our capital position and help us to create a strong and secure bank,” RBS chief executive Ross McEwan said. – (Reuters)