RBS unloads Bank of China stake to boost balance sheet

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The bank that has been bailed out by the British Government offered investors the 10.8 billion shares it owns in Bank of China for HK$1.68 to HK$1.71 each — a discount of up to 9% on this morning's closing price of HK$1.85.

Analysts in Hong Kong said it marked a "loss of face" for RBS but came as no surprise in the City as RBS moves to further strengthen its battered balance sheet under new chief executive Stephen Hester.

It also earned RBS a tidy profit. It bought the 4.3% stake for $1.6 billion in 2005, but will lose some of the gains through hedges and fees.

The Government was forced to step in and take a 58% stake in RBS for £20 billion in October to help it recover from crippling writedowns and losses in the credit crunch and economic downturn.

Since taking over as chief executive from Sir Fred Goodwin in November, Hester has moved to refocus RBS towards UK lending rather than the international expansion seen under his ousted predecessor, the climax of which was the ill-fated 71 billion takeover of ABN Amro.

UBS and Bank of America have also sold holdings in Chinese banks amid the worst financial crisis since the Great Depression of the 1930s. The RBS move came after a three-year lock-in period ended.

"For RBS, they don't really have much choice," said Samuel Chen at JP Morgan Chase in Hong Kong. "They would probably rather hold it."

Analysts in London were most positive, although RBS shares fell 5.2p to 49.8p as investors focused on its $3.5 billion exposure to bankrupt US chemicals group Lyondell Chemical.

Of the Bank of China stake, Ian Gordon of Exane BNP Paribas said: "It makes sense and it will crystallise a gain. It's not a stake that has strategic importance in terms of synergies for the group."