Royal Bank of Scotland in Talks to Buy Stake in Bank of China

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Royal Bank of Scotland in Talks to Buy Stake in Bank of China


Source: Bloomberg


April 9 (Bloomberg) -- Bank of China, the nation's second- biggest lender, said it's in talks with Royal Bank of Scotland Group Plc about possible sale of a stake ahead of its initial public offering.

``We are in talks with Bank of Scotland and other banks, but nothing has been finalized,'' spokesman Wang Zhaowen said in a telephone interview from Beijing. He said a Hong Kong report that the Edinburgh-based bank is close to agreement on taking between a 15 percent and 20 percent stake is ``inaccurate.''

The South China Morning Post reported Royal Bank of Scotland is on the cusp of an agreement to pay as much as $4 billion for up to a 20 percent stake in the Chinese lender, citing unidentified people. UBS AG may invest $300 million for up to a 2 percent stake in Bank of China, the newspaper said.

Bank of China said two days ago it's in talks with of Bank of America Corp., Deutsche Bank AG, UBS AG and seven other foreign lenders about the sale of a stake. Wang, who declined to name any other bidders today, said a decision on selling stakes to overseas lenders may come before the end of June.

``We can sell up to a maximum of 25 percent to foreign banks, and are likely to end up with three to four as strategic investors,'' Wang said. Chinese banks are allowed to sell a maximum 25 percent stake to foreign investors, with no single investor holding more than 20 percent.

Bad Loans

Bank of China has reorganized into a joint-stock company, writing down bad loans and preparing to sell shares as part of government plans to strengthen the financial industry before foreign lenders are allowed to do local currency business at the end of December 2006. The lender may seek to raise between $4 billion and $5 billion in its initial public offer, people familiar with the sale said last year. The sale is expected next year.

Bank of China and China Construction Bank, the third- largest lender, each received a $22.5 billion government bailout at the end of 2003 to help them boost capital ahead of their share sales.

Beijing-based Bank of China hired BOC International (Holdings) Ltd., its investment banking arm, CITIC Securities Co., China Galaxy Securities Co., and Guotai Junan Securities to advise on its reorganization. The bank hasn't hired banks to arrange its initial public offering yet.

The bank may seek to raise between $4 billion and $5 billion in the IPO, people familiar with the sale said year.



To contact the reporter for this story:
Janet Ong in Shanghai at jong3@bloomberg.net.

To contact the editor responsible for this story:
Bruce Grant at bruceg@bloomberg.net.

Last Updated: April 8, 2005 23:56 EDT