RBS sells $2.4 billion Bank of China stake: sources
HONG KONG/LONDON (Reuters) - Royal Bank of Scotland sold about $2.4 billion of shares in Beijing-controlled Bank of China, sources said, in a clear sign the beleaguered UK bank is scaling back its overseas ambitions.
RBS's new chief executive is overhauling strategy and analysts had expected the Bank of China stake to go after the UK government took a 58 percent holding in RBS, hit hard by the credit crisis and Britain's economic slowdown.
RBS sold all of its 10.8 billion Bank of China shares at around HK$1.71 per share, according to market sources on Tuesday, representing a 7.6 percent discount to the closing price of HK$1.85. The offer was well covered, one source said.
RBS has branches in five Chinese cities and 13 sub-branches, with 3,500 staff, following its acquisition of parts of ABN AMRO last year. But it joins other overseas investors to sell stakes in Chinese banks, retreating due to strains on capital and problems closer to home.
The Edinburgh-based bank has operations elsewhere in Asia and owns top 10 U.S. bank Citizens, but Chief Executive Stephen Hester could signal plans to sell the U.S. arm and other assets when he releases 2008 results next month, analysts said.
He is under less pressure for fire sales after the government injected 20 billion pounds ($29.2 billion) to boost its balance sheet, but is expected to continue to shrink the balance sheet and put focus back on core UK banking, after an aggressive acquisition spree by his predecessor Fred Goodwin.
Hester's strategic review is not due to be completed until the end of June.
Bankers were selling the Bank of China stake at between HK$1.68 and HK$1.71 apiece, according to a document sent to potential investors seen by Reuters.
RBS would reap a sizable profit on the 4.3 percent holding, which it bought in 2005 for $1.6 billion, and also reduce risk- weighted assets on its balance sheet.
"It makes sense and it will crystallize a gain. It's not a stake that has strategic importance in terms of synergies for the group," said Ian Gordon, analyst at Exane BNP Paribas in London.
"There's no necessity for holding on to the stake in Bank of China irrespective of their ambitions in the region," he added.
Bank of China said it held talks with RBS about the sale.
STRATEGIC RETREAT
The sale was handled by Morgan Stanley and RBS bankers.
RBS and Morgan Stanley declined to comment.
The retreat by RBS and other western banks could damage their relationships with Chinese authorities, analysts said. That could give banks with bigger branch businesses, such as HSBC, Citigroup and Standard Chartered, an advantage in tapping into future Chinese growth.
Swiss bank UBS AG last month sold a 1.5 percent stake in Bank of China, and Bank of America last week sold a 2.5 percent stake in China Construction Bank for just over $2.8 billion. Those stakes were sold at a discount of around 12 percent.
A fund controlled by Hong Kong billionaire Li Ka-shing also last week sold 2 billion shares in Bank of China.
The RBS sale leaves Singapore state investment agency Temasek as the largest foreign investor in Bank of China, with a 4.1 percent holding.
Temasek is regarded as being under less pressure to sell its stake. It also holds about 2.1 percent of China Construction Bank.
RBS shares fell 7.1 percent to 51.1 pence, one of the weakest stocks in a lower European bank sector. Dealers blamed the fall on a reversal in a fragile mood among UK bank stocks and concern about a loan exposure to bankrupt U.S. chemicals group Lyondell Chemical.
(Additional reporting by Heng Xie in Beijing; Editing by Erica Billingham)
