Royal Bank of Scotland Plc, the largest government-controlled bank in the United Kingdom, is selling its entire US$2.3 billion stake in Bank of China Ltd to replenish capital depleted by writedowns.
The Edinburgh-based bank is offering investors 10.8 billion shares at HK$1.68 (22 US cents) to HK$1.71 apiece, or about 8.4 percent less than BOC's closing price in Hong Kong yesterday, according to a document sent to investors yesterday. Morgan Stanley and RBS's ABN Amro unit are managing the sale.
Stephen Hester, who became RBS's chief executive officer in November after a 20-billion-pound (US$29 billion) government bailout, is seeking to repair a balance sheet hobbled by more than 7 billion pounds of writedowns in 2008. He follows UBS AG and Bank of America Corp in paring holdings in Chinese banks, after a three-year lockup ended, amid the worst financial crisis since the Great Depression, according to Bloomberg News.
"For RBS, they don't really have much choice," said Samuel Chen, a Hong Kong-based analyst at JPMorgan Chase & Co. "They would probably rather hold it."
RBS fell 6.6 percent to 51.4 pence at 11:50am in London trading, valuing the bank at about 20.3 billion pounds.
RBS, BoA Corp and Goldman Sachs Group Inc are among overseas financial firms that bought stakes in Chinese banks before they went public in 2005 and 2006.
RBS paid 900 million pounds for the stake in August 2005, investing alongside the Li Ka-shing Foundation and Merrill Lynch & Co, now owned by BoA. Bank of China went public in 2006.
While the investors touted the "strategic" nature of their purchases, the US$738 billion of writedowns and credit losses banks and brokers have recorded worldwide since 2007 added urgency to stake sales.
The Hong Kong-traded shares of BOC have fallen 46 percent in the past year, paring the value of RBS's stake, as the bank racked up US$3.7 billion of losses from securities linked to United States home loans, more than any other Chinese lender.
Hong Kong billionaire Li Ka-shing raised US$511 million selling shares in BOC on January 7.
Separately, BoA sold US$2.8 billion of shares in China Construction Bank Corp, while Zurich-based UBS sold about US$900 million of BOC shares last week.
Goldman Sachs still owns 16.5 billion shares in Industrial and Commercial Bank of China, the world's largest bank by market value. The US investment bank has agreed not to sell the shares until after April 28.
(Shanghai Daily January 14, 2009)
