RBS 'would have told' Bank of China of any plans to sell stake

Published on Tuesday 30 December 2008 20:51

ROYAL Bank of Scotland has no plans yet to sell its 4.3 per cent stake in Bank of China after a "lock up" period expires today, the Chinese bank said yesterday.

"If RBS plans to sell our shares, they need to inform us in advance. So far, we haven't received such notice," Bank of China's investment relations official Luo Nan said from Beijing.

"It was also specified in the terms of the contract that if RBS wished to sell the shares, it is responsible for maintaining price stability."

The lock-up period prevented RBS from selling the stake for more than three years after buying it in 2005.

Sir Fred Goodwin, RBS's chief executive at that time, acquired the stake as part of a consortium of foreign investors taking holdings in BoC before it went public with a Hong Kong share listing.

Goodwin was ousted recently as part of the government's rescue recapitalisation of RBS, which resulted in the taxpayer sitting on a near-60 per cent stake in the bank.

RBS declined to comment earlier this week on speculation that its new chief executive, Stephen Hester, was mulling a possible sale of the Chinese stake as he seeks to focus on the bank's more traditional operations.

The Royal's BoC holding is currently worth about 1.6bn in the market – about double the 850m it paid for it.

Ivan Li, a banking analyst at Kim Eng Securities in Hong Kong, said yesterday: "RBS is under financial pressure at home, so it's quite possible it would choose to reduce holdings at an appropriate price.

"But it's very difficult to judge the timing."

BoC spokesman Wang Zhaowen was quoted by the Oriental Morning Post yesterday as saying that RBS needed to notify the Chinese lender at least a month ahead of any planned share sales.

RBS and three other foreign strategic investors including Temasek Holdings and UBS paid a combined $6.8 billion for an aggregate 21.9 per cent stake.

Immediately after RBS obtained a capital injection from the British government in October, BoC reaffirmed its commitment to the strategic partnership with RBS.

BoC's shares have dropped 42 per cent in Hong Kong this year. They are currently trading at HK$2.19.