The New York flotation of 25 per cent of RBS-owned Citizens bank has prompted a lukewarm response from investors, the shares rising by around 3.5 per cent on its market debut.

The biggest initial public offering of a US bank since the crash has raised £3 billion for the Edinburgh-based state-owned lender, but the $12.5bn valuation was below RBS's original hopes of $14bn in what has been a hot US market for IPOs.

It came as the bank's chairman Sir Philip Hampton was reported to be on the brink of confirming his appointment as the new chairman of GlaxoSmithKline and his need to stand down from RBS next year. It comes days after GSK was fined £300m by Chinese authorities for bribery. The pharmaceutical giant's shares have fallen by over 11 per cent over the past year.

RBS had originally planned to sell the shares at between $23 and $25, but ended up selling them for $21.50 each. It was forced to cut the price of the IPO due to investor uncertainty over its ability to meet profitability targets, analysts said.

RBS, whose stake in the Rhode Island-based bank will drop to 75 per cent after the IPO, has said it intends to sell all of its stake by 2016 and is aiming to sell a further 25 per cent by next March.

Analysts said RBS's core capital adequacy ratio should be boosted by two to three percentage points once it sells at least half of Citizens, probably in 2015.

Citizens, which was bought by RBS in 1988, is the 13th biggest bank in the US with five million customers. On an expansion spree under Fred Goodwin, RBS notoriously overpaid for MidWest bank Charter One 10 years ago in a deal worth $10.5bn.