Asian banks battle for $7.5 billion RBS Aviation: source

HONG KONG Thu Jan 5, 2012 2:17pm EST

A man riding an escalator is silhoutted in front of a signboard of Sumitomo Mitsui Financial Group in Tachikawa, western Tokyo, November 30, 2010. REUTERS/Yuriko Nakao

A man riding an escalator is silhoutted in front of a signboard of Sumitomo Mitsui Financial Group in Tachikawa, western Tokyo, November 30, 2010.

Credit: Reuters/Yuriko Nakao

HONG KONG (Reuters) - China Development Bank and Japan's Sumitomo Mitsui Financial Group (8316.T) are slugging it out in the final days of an auction to buy Royal Bank of Scotland's (RBS.L) aircraft leasing business in a deal that could fetch up to $7.5 billion, a source with direct knowledge of the matter told Reuters on Thursday.

RBS, 83 percent-owned by the British government, is shedding the RBS Aviation Capital business as part of its effort to sell off parts to pay back a 2008 bailout.

The RBS Aviation auction reaches its final stages as RBS begins a larger process to pare back the size of the bank. Reuters reported on Wednesday that RBS has hired Lazard to advise it on scaling back it's global investment banking arm.

For the RBS Aviation auction, a decision on the winner is expected by early next week, the source said, with a sale price in a range of $7.3 billion to $7.5 billion.

U.S. bank Wells Fargo (WFC.N) and a consortium led by Australian investment bank Macquarie (MQG.AX) are no longer in the race, said the source, who was not authorized to speak to the media.

RBS declined comment, while SMFG and CDB officials were not immediately available to comment. Goldman Sachs, which is advising RBS, also declined to comment.

RBS Aviation is one of the world's top five commercial airline leasing firms - it owns, manages or has orders for 466 aircraft, industry sources and analysts have said.

The RBS Aviation sale comes as U.S. insurer AIG (AIG.N) prepares to float its much larger ILFC leasing unit, though plans for that IPO have been postponed.

Aircraft leasing is seen as attractive as it offers steady demand and steady cash flows.

In a 452-page report released last month, Britain's market regulator criticized RBS for its massive purchase of Dutch bank ABN Amro, a deal credited with triggering RBS's near collapse.

Under former Chief Executive Fred Goodwin, RBS came within hours of running out of cash in October 2008, and was only saved by a 45 billion pound ($70.3 billion) taxpayer bailout.

(Additional reporting by Taiga Uranaka in TOKYO, Sudip Kar-Gupta in LONDON and Koh Gui Qing in BEIJING; Editing by Jacqueline Wong and Ian Geoghegan)

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