By Sundeep Tucker in Hong Kong and Geoff Dyer in Beijing
Published: January 7 2009 23:44 | Last updated: January 7 2009 23:44
Royal Bank of Scotland, the cash-strapped UK lender, is considering selling its ￡2bn stake in Bank of China amid a scramble by foreign investors in mainland banks to cash in their lucrative holdings.
Stephen Hester, recently appointed as RBS chief executive after the bank was rescued by the UK government, visited Beijing this week where he met BoC executives and regulators and flagged a possible divestment of its 4.3 per cent stake.
“No final decision has been made about whether the BoC stake will be sold,” said one person familiar with the situation. “But the Chinese are now aware of RBS’s thinking on the issue. Selling the stake is among the options.” RBS declined to comment.
RBS acquired the stake for ￡800m in December 2005 as the lead partner of a consortium that included Merrill Lynch and Temasek. The three-year lock-in period on the investment expired last week.
Several other foreign financial institutions, including Goldman Sachs, Citigroup and Dresdner Bank, invested in China’s leading banks and analysts believe they too could be tempted to raise cash by selling stakes once lock-ins expire in the coming weeks.
Mr Hester’s brief Asia trip this week formed part of his strategic review. Selling the BoC stake would help repair the bank’s balance sheet and repay UK taxpayers.
However, any divestment has to be handled sensitively because Beijing fears that an unruly exit by foreign investors could undermine official support for the domestic banking sector at a time of rising financial stress.
Bank of America this week sold a 2.5 per cent stake in China Construction Bank for $2.8bn (￡1.8bn), booking a $1.1bn profit, less than a month after abandoning a similar attempt to trim its near-20 per cent holding in the mainland lender.
Meanwhile, Li Ka-shing, the Hong Kong tycoon, also this week raised more than $500m by selling part of a BoC stake acquired by his charitable foundation alongside RBS.
That share sales follow that of UBS, which last week sold its entire 1.33 per cent stake in Bank of China for $835m, booking a profit of about $335m.
The prospect of further sales helped drive down Chinese bank shares on Wednesday. CCB shares dropped 8.8 per cent, while shares in Industrial and Commercial Bank of China and BoC also fell.
“The overhang concern should further add near-term pressure on the share price,” said Samuel Chen, analyst at JPMorgan in Hong Kong in a report on CCB.
CCB said on Wednesday that the share sale would not change its relationship with its US partner.
It said in a statement: “Bank of America has said many times that it will reduce some of its stake and it will not change its status as an important shareholder.”
