A gem in a normal market might be a tough sell in the current one.

Citizens Financial Group, the U.S. operation of Royal Bank of Scotland, has hired Bank of America's (BAC) Merrill Lynch unit to help find a buyer for its 106 branches in Chicago, Crain's Chicago Business reported on Friday, citing people familiar with the matter.

Operated as Charter One, the branches hold roughly $6 billion in deposits or 1.83% of the deposits in the Chicago metropolitan area, according to data from the Federal Deposit Insurance Corp.

Bank M&A is always a hot topic in the Second City, given the fierce competition there. More than 230 banks duke it out in Chicago, so the opportunity to pick up one of its larger deposit holders should garner no shortage of interest from ambitious super-community banks in the market and larger regional and national players.

However, turning that interest into a deal will likely prove challenging, observers say. Based on several interviews with analysts, there is no clear front-runner in terms of a natural fit or ability to make a deal happen. Additionally, in a period of weak loan growth, the assets or lending platforms RBS chooses to include would be crucial to the deal's appeal.

"The first issue is the regulatory aspect of getting it approved, but the second issue would be how the deal is structured — what's on the left-hand side of the deal?" says Jeff K. Davis, a managing director at Mercer Capital. "What do you do with all of that cash in this environment?"

The predicament RBS faces with its U.S. operations is familiar. Questions about the Citizens unit arose in 2008 when it was nationalized by the United Kingdom. The potential sale of Citizens or various pieces of its branch network has come up several times in the last few years, even earlier this year when the company announced it would pursue taking a quarter of Citizens public.

Such moves are often attempts to smoke out a buyer for the entire organization, but at $137 billion in assets, most observers say its size makes a full sale a nonstarter for prospective buyers.

The Chicago sliver brought the same reactions, too. U.S. Bancorp (USB) and Fifth Third Bancorp (FITB) could potentially be interested, several analysts say. For U.S. Bancorp, the deal would double its market share. For Fifth Third, it would increase it by 50%.

Both companies, as well as RBS, declined to comment on market speculation, but analysts say they are unsure if regulators would allow the banks to acquire the branches.

"We don't know if big banks can do any kind of deals right now," says Terry McEvoy, an analyst at Oppenheimer.

Bruce Van Saun, the new chief executive of Citizens, has repeatedly said that current market conditions make a sale of the full unit unattractive. When asked about the Chicago branches in an interview with American Banker on Wednesday, he called the current Citizens branch network "fairly attractive".

"One thing I really like about Citizens is our footprint. … Every bank from time to time looks at different opportunities to fine-tune that footprint, but I think that's what we'd really be talking about, fine-tuning."

In the shadows of MB Financial's (MBFI) announcement this summer that it would acquire Taylor Capital (TAYC), several of the larger community banks could see the Charter One branches as their opportunity to do something big. Skepticism once again crept up, though.

FirstMerit (FMER) would be a natural fit. The Akron, Ohio, company expanded into Chicago a few years ago. But this year it doubled its size by acquiring Citizens Republic Bancorp in Flint, Mich., and observers say its focus is on the integration. FirstMerit did not return a call seeking comment for this story.

PrivateBancorp (PVTB) is facing some potential funding pressure because of its robust loan growth, but the Charter One branches are likely not the best fit, says Chris McGratty, an analyst at Keefe, Bruyette & Woods. Charter One is retail focused, whereas Private works with businesses and the wealthy. Also, 105 branches are probably too many. If Citizens is willing to carve up the offering, Private could likely be a contender; it declined to comment.

"People are starting to ask about their long-term funding. It is a key thing for them," McGratty says. "But we are talking a couple of billion, not six."

While getting a deal inked might prove difficult, the chance to pick up a large deposit-holder in Chicago will likely whet a lot of appetites.

"How often do you have an opportunity to pick up $5 billion of deposits in Chicago?" McEvoy says. "Everybody is at least going to run the numbers to see if it makes sense."

Andy Peters contributed to this story.

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