Royal Bank of Scotland is understood to be considering selling its 4.3% stake in Bank of China following chief executive Stephen Hester’s visit to Beijing this week.
Hester, who replaced Fred Goodwin after the bank was rescued by the UK government last October and a former chief of British Land, reportedly met with Bank of China executives and Beijing regulators this week. He is said to have flagged a possible divestment of RBS’s 4.3% stake.
RBS dismissed suggestions of a stake sale last Summer, but the changed fortunes of both RBS and the global economy are believed to have kick-started a reversal of the bank’s international expansion strategy.
The 4.3% stake was acquired as part of a £1.7bn 10% acquisition in December 2005 alongside Merrill Lynch and Singapore’s Temasek, with RBS putting in approximately £900m for its share. A three-year lock-in period was assigned to the acquisition at the time and has now expired.
In the same deal, Li Ka-Shing Foundation took a 2% stake for US$750m. Hong Kong tycoon Li Ka-Shing sold part of that stake for US$500m yesterday. UBS sold a 1.33% stake in Bank of China for US$835m last week.
Although Bank of China shares have fallen by more than 45% over the past year, a sale could prove profitable with a potential £2bn price tag for the RBS stake. Li Ka-Shing is believed to have made a profit of approximately US$218m.
In order to raise financing for the Bank of China purchase, RBS sold its 2.2% stake in Banco Santander Central Hispano, the bank which partnered with RBS and Fortis for the €71bn acquisition of Dutch group ABN AMRO.
Some market analysts suggest that a move by Hester to exit the Bank of China interest could result in RBS calling off the sale of its insurance operations Direct Line and Churchill.
By Robert Venes