RBS holds talks with Sumitomo over Citizens sale -WSJ

* RBS (LSE: RBS.L - news) says still planning for Citizens (NYSE: CIA - news) flotation

* Sumitomo (Frankfurt: SUMA.F - news) declines comment

* RBS wants to sell Citizens to bolster capital position (Adds reaction from RBS, Sumitomo, further details)

LONDON, March 24 (Reuters) - Royal Bank of Scotland has held preliminary talks over the possible sale of its U.S. retail business Citizens to Sumitomo Mitsui, the Wall Street Journal reported on Monday, citing people familiar with the discussions.

The Journal said talks between Japan's second-largest bank and RBS, which is 81 percent owned by the British government, were at an early, informal stage and might not progress further. It said some of the people assessed the odds on a deal being completed at less than 50 percent.

RBS said last November it would speed up a planned stock market flotation of Citizens in New York (Frankfurt: HX6.F - news) , aiming to start the process in the second half of 2014 and to fully sell the business by the end of 2016.

RBS said on Monday that plan remained unchanged and declined to comment on whether it had held talks with Sumitomo. Chief Executive Ross McEwan had previously indicated that, while the bank was planning for an initial public offering (IPO), it was open to approaches from potential buyers.

Sumitomo declined to comment.

RBS is under pressure to bolster its capital position which has come under strain following a 3 billion pound ($5 billion)charge for past misdeeds which it announced in January.

A number of possible buyers have previously been linked with Citizens, including Mitsubishi UFJ, Canada's Toronto- Dominion Bank, Brazilian company Itau Unibanco and U.S. Bancorp. ($1 = 0.6065 British Pounds) (Reporting by Matt Scuffham; Editing by Steve Slater and David Holmes)