(Adds context of RBS discussions about Citizens)
NEW YORK, Oct 24 (Reuters) - British bank Royal Bank of Scotland is expected to name Morgan Stanley as the lead underwriter for a proposed initial public offering of its U.S. subsidiary, Citizens Financial Group Inc, according to people familiar with the matter.
RBS, under pressure from British regulators to bolster its capital and sell off non-core assets, said in February that it would sell 20 percent to 25 percent of Citizens by the end of 2014 through an initial public offering in New York. Sources have told Reuters RBS would be keen to proceed with an IPO more quickly if market conditions are right.
RBS is working with Morgan Stanley to help prepare for the Citizens offering and has also interviewed other banks in recent weeks to add more underwriters, three people familiar with the matter said this week.
The bank has not made any decisions yet, they added, asking not to be identified because the discussions are private.
RBS and Morgan Stanley both declined to comment.
RBS, which is 82 percent owned by British taxpayers, was saved from collapse in 2008 with a 45 billion pound ($68 billion) bailout. Since then, the bank has shed 900 billion pounds of assets as it focuses more on lending to British households and small businesses.
Despite regulatory pressure to sell Citizens, which analysts have valued at between $9 billion and $15 billion, RBS has been keen to avoid selling the U.S. subsidiary at a knock-down price, sources have told Reuters.
Canadian group Toronto Dominion Bank held talks with RBS about buying Citizens last year, but nothing came out of the discussions partly because the two sides could not agree on a value, people familiar with the matter told Reuters previously.
On an Oct. 17 investor call, TD Chief Executive Office Ed Clark said the lender is not looking to buy another U.S. retail bank..
Providence, Rhode Island-based Citizens Financial Group Inc is a $118 billion commercial bank holding company and has about 1,400 branches throughout the United States, according to the company's website.
The bank is looking to sell its more than 100 Chicago branches in the next few months before an IPO, sources have told Reuters.
(Reporting by Jessica Toonkel and Soyoung Kim in New York, additional reporting by Matthew Scuffham in London; Editing by Phil Berlowitz)