RBS gets nod to buy 20 pct of China's Suzhou Trust

SHANGHAI (Reuters) - Royal Bank of Scotland Group Plc (RBS.L) has won approval from Chinese regulators to buy a nearly 20 percent stake in Suzhou Trust Co as it expands in corporate banking and wealth management services in China, sources with direct knowledge of the situation said on Friday.

Suzhou Trust, a mid-sized trust and investment firm based in Suzhou, a prosperous manufacturing and tourism centre in eastern China, will issue new shares to RBS in a private placement, said the sources, who declined to be identified because they were not authorized to speak to the media.

The sources declined to give financial details, but Suzhou Trust's chairman has said it had more than 7 billion yuan ($1 billion) of assets under management at the end of 2007.

A foreign institution can hold no more than 20 percent of a Chinese trust company, while overseas investors can have a combined stake of up to 25 percent, according to Chinese rules.

"Suzhou Trust wants the money to boost its capital base, while RBS is eager to secure a Chinese partner, so they both get what they want through the deal," said one of the sources.

"Why a trust company? Because nowadays a trust company can offer a very broad platform for many financial investments and for offering a wide range of financial services to clients," he added.

The Chinese banking regulator approved the deal at the end of last month and an official joint announcement by the two companies is expected in the next few weeks, the sources said.

A spokeswoman for RBS in London declined to comment and no comment was available from Suzhou Trust.

RBS is also a minority shareholder in Bank of China (601988.SS), China's top foreign exchange lender.

Suzhou Trust, established in 1991 and one of China's oldest trust houses, counts several state-owned toll expressway operators, Suzhou Gas and Suzhou Museum among its clients, according to its website (www.trustsz.com).

Beijing has been moving since 2006 to bolster China's trust companies, which were hit over the past decade by a series of bankruptcies and scandals. The government approved their participation in an overseas investment scheme in April 2007.

Under Chinese rules, domestic trust companies face fewer obstacles than most other financial institutions in making equity investments in a wide range of financial sectors, including insurance, securities broking, asset management and private equity.

Trust companies are also allowed to offer a variety of corporate banking services, including asset management and indirect fund-raising for domestic enterprises.

Earlier this year, Barclays Plc (BARC.L) and National Australia Bank Ltd (NAB.AX) won Beijing's approval to buy into Chinese trust partners.

($1=6.862 Yuan)

(Additional reporting by Steve Slater in London; Editing by Edmund Klamann)