RBS sells entire stake in Bank of China

| January 14, 2009 | 0 Comments

It has now been confirmed that Royal Bank of Scotland (RBS) has sold its 4.3% stake in Bank of China for £1.6 billion.

RBS sold all of its 10.8 billion Bank of China shares at a price of 1.71 Hong Kong dollars per share.

The news is confirmation that the bank is looking to trim back its overseas holdings as part of its ongoing strategic review.

According to analysts, chief executive of RBS, Stephen Hester, could signal plans to sell the US arm and other assets when he releases 2008 results in February.

Meanwhile, last year, Swiss bank UBS sold its entire 1.5% stake in Bank of China, while just last week Bank of America sold a 2.5% stake in China Construction Bank. RBS’ sale of Bank of China has brought with it speculation that similar transactions will arise.

According to analysts, a considerable amount of the £34 billion of capital invested by financial groups in Chinese may be sold.

One of the primary reasons for this is the future of Chinese banks is deteriorating as the economy faces heavy falls in exports and factory closures.

Meanwhile, RBS has been looking to improve its balance sheet after concerns were raised over its exposure to the collapse of US chemical giant Lyondell after it was revealed that the bank acquired a £2 billion loan to the company in its acquisition of ABN Amro.

Last week, Lyondell, the US subsidiary of the Dutch-headquartered firm, filed for Chapter 11 bankruptcy following a fall in demand for its products.

A spokesperson for RBS admitted its exposure to Lyondell and said the bank is hoping to recover some of the cash from the sale of assets.

RBS was bailed out by the taxpayer in November due to the small take-up of its £15 billion share offer by investors, the Government now owns 57.9% of the bank.

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