| Royal Bank of Scotland acquires 10 percent stake in Bank of China |
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LONDON/BEIJING - The Royal Bank of Scotland has joined hands with Merrill Lynch and Hong Kong billionaire Li Ka Shing and has acquired a 10 percent stake in the Bank of China in a deal worth $3.1 billion (£1.7 billion). RBS would contribute $1.6 billion towards this amount.
The Bank of China happens to be China's second biggest lender and is seen as a bank that has a positive international outlook. Worldwide banking firms are very keen to gain a foothold in the banking sector of the world's most populous country and the Bank of China is seen as an ideal vehicle in doing so. It may be recalled that the Bank of America had acquired a 9.1 percent stake in the China Construction Bank for $3 billion in June. UK firms have also evinced a keen interest in China's vast banking sector and HSBC had acquired 19.9 percent stake in Bank of Communications, which happens to be China's fifth-biggest lender. HSBC had invested $1.75 billion in this deal last year.
The Royal Bank of Scotland said that it would be unloading its stake in Spain's Banco Santander Central Hispano for $1.6 billion to help it fund the Chinese deal. RBS Chairman Sir George Mathewson was of the opinion that China represented an important opportunity for the bank to further increase its international ambitions, "We have been developing our relationship with Bank of China over the last 18 months, and have been impressed by the strengths of the business and its compatibility with RBS. We regard our investment as an important part of cementing our long-term relationship with Bank of China but have no plans to increase our shareholding further," he revealed.
RBS will have a seat on the board of the Bank of China. Under the deal, RBS and the Bank of China have agreed to "co-operate across a range of business activities, building on Bank of China's distribution strength and RBS's product skills in areas including credit cards, wealth management, corporate banking and personal lines insurance."
RBS has acquired the Bank of China stake from the government-run Central Huijin Investment. The agreement is subject to regulatory approval and is expected to be formalized in the fourth quarter. RBS would now extend its reach to Bank of China's 11,307 branches. However, the bank has categorically denied having any ambitions for a full-blown takeover. RBS shares rose by 2.5 percent in the backdrop of this news.
Posted
on : Fri, 19 Aug 2005 06:05 GMT | Loans News
By : Paula Jenkins
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