Shares of Citizens Financial Group, the U.S. unit of Royal Bank of Scotland, rose less than 1 percent in their debut, valuing the company at about $12 billion in the biggest U.S. offering by a bank since the financial crisis.
The offering, which raised $3.01 billion for RBS, is the second biggest in the United States this year after Alibaba Group Holding's $25 billion IPO last week.
Citizens Financial's IPO was priced at $21.50, below the expected range of $23-$25.
RBS owned 100 percent of Citizens Financial before the offering.
Citizens Financial's shares were at $21.64 shortly after the start of trading.
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Citizens initially said it expected its IPO to be priced between $23 and $25 per share. RBS is selling all 140 million shares in the offering and could sell a further 21 million in an over-allotment option granted to the underwriters of the offering.
RBS, which is 80 percent-owned by the British government, is hiving off the 186-year-old Rhode Island-based bank as it is under pressure from regulators and lawmakers to bolster its capital and focus on lending to UK households and businesses.
"Selling Citizens will significantly improve our capital position and help us to create a strong and secure bank...," RBS Chief Executive Ross McEwan said in a statement.
The British bank's stake in Citizens would drop to 75 percent from 100 percent after the IPO. RBS has already said it intends to fully exit Citizens by 2016.
Analysts have said that once RBS sells at least half of Citizens, probably in the first half of 2015, its core capital adequacy ratio should be boosted by 2-3 percentage points, although the initial IPO is unlikely to have much impact.
Citizens provides retail and commercial banking services to about 5 million customers in the United States and ranks as the country's 13th biggest retail bank holding with about $130 billion in assets.
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The 186-year-old bank, headquartered in Providence, Rhode Island, was bought by RBS in 1988 and expanded with 25 acquisitions, including the 2004 purchase of Charter One.
It had 18,000 staff and 1,200 branches in 11 states across the New England, Mid-Atlantic and Midwest regions at the end of June. It had a net profit of $479 million in the six months to the end of June on revenue of $2.6 billion.
Morgan Stanley, Goldman Sachs and J.P. Morgan are the lead advisors on the IPO.