ROYAL Bank of Scotland's prized American division Citizens is reportedly a £10bn target for one of Brazil's biggest banks.

The Rhode Island-based retail bank, which was built up by former RBS chief executive Fred Goodwin and now has more than 1,500 branches across 12 states, is attracting plenty of bid interest, including from Brazil’s Itau Unibanco.

The division has a rumoured price tag of around £10bn and cash raised from any sale could be used by RBS to buy back part of the Government’s 80% stake in the bank, realising a windfall for British taxpayers, according to reports yesterday.

Itau, which has a market value of about £45bn on the back of explosive growth in the Brazilian economy, is keen to buy a deposit-taking bank in the US in order to diversify its funding base and grow its reputation overseas.

RBS chief executive Stephen Hester last week labelled recent bid talk on Citizens as “inaccurate” but reports about the latest interest in the US division said it was an open secret that RBS has no intention of holding on to the bank over the longer term.

While its current plan is to force through a restructuring to boost profitability and sell it in about three years, Itau and Canada’s TD Bank are reportedly mulling whether to pull the trigger sooner.

Bank of America Merrill Lynch and JP Morgan Chase would both be expected to show interest in Citizens, along with other foreign banks. Although home to some of the world’s biggest banking groups, the domestic retail market in the US is fragmented with hundreds of small regional lenders. Citizens has strong positions in the rich states of America’s north east.

RBS posted losses of £1.5bn for the first six months of the year on Friday.

But it surprised analysts with the pace at which it is running off the problem loans built up during Mr Goodwin’s reign.