RBS and Bank of China are pleased to announce that they have reached agreement to establish an exclusive strategic partnership. Within this partnership:

• RBS and 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.
• In addition, the two banks will establish close co-operation in certain key operational areas, including corporate governance, risk management, financial management, human resources and information technology. RBS will nominate a director to sit on the Board of Bank of China.
• RBS will lead an investment of 10% in Bank of China for $3.1 billion (£1.7 billion). Within this, RBS itself will invest $1.6 billion (£0.9 billion). RBS and its co-investors have committed to retain their investment in Bank of China for three years. RBS has no plan to increase its investment in Bank of China.
• Appropriate warranties and protections have been received
• The transaction is subject to regulatory approvals

Bank of China

Bank of China, the second largest of China's big four banks, was established in 1912. It traditionally focused on trade-related activities such as trade finance and foreign exchange, where it still has leading market shares. In 1994, Bank of China was converted from a specialised trade bank to a broadly-based state-owned commercial bank.

In Mainland China, Bank of China has 11,307 branches and market shares of 12% of loans and 14% of deposits. Bank of China has branches throughout Mainland China, but its activities are concentrated in the large cities in eastern China. Bank of China's brand appeals in particular to affluent personal customers and large corporate customers.

Bank of China is the most internationalised bank in China. It has subsidiaries in 27 countries including a strong presence in Hong Kong, where its subsidiary Bank of China Hong Kong has already been restructured and partially floated. The value of the 66% of Bank of China Hong Kong owned by Bank of China is $14.8 billion.

In 2004, Bank of China's total income was $12.6 billion. At the end of 2004, its assets amounted to $516 billion and its net asset value stood at $24.8 billion. Income, assets and net asset value are stated on a PRC GAAP basis. Bank of China has about 238,000 employees.

Over the last 4 years, Bank of China has grown its loans and deposits by 11% per annum.

In August 2004, Bank of China was re-established as a shareholding company, with 100% of its shares owned by Central SAFE Investments Limited.

More information about Bank of China is available on www.bank-of-china.com.

Commenting on the transaction, RBS Chairman, Sir George Mathewson, said:

"The RBS Board believes that the size and growth of China represents an important opportunity. 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. The combination of Bank of China's brand, distribution and customer base with RBS's product and operational strengths and experience will be powerful in the Chinese market. We are excited by the potential of this partnership and look forward to working together in the years to come to realise it."

Bank of China Chairman, Xiao Gang said:

"I am delighted that an investment agreement has been reached with RBS. With its experienced management, outstanding business strengths, well-established internal control mechanisms and prudent management style, RBS is an ideal partner. The co-operation with RBS is a key step in our joint stock reform, and is crucial to transforming the operational structure, enhancing the internal management, improving the competitiveness and promoting our profitability."

Mr Wang Jianxi, Vice Chairman of Central SAFE Investments Limited, the major shareholder of Bank of China, said:

"Bringing in international strategic investors is an important step in the deepening of the reform of state-owned commercial banks in China. Through strategic co-operation with RBS, Bank of China will be able to further enhance its corporate governance and internal control. We are confident that the strategic cooperation between Bank of China and RBS will produce positive results for both parties."

Impact on RBS

RBS will raise the £0.9 billion for its investment in Bank of China through the disposal for £0.9 billion of its shareholding in SCH, which it has announced today. The placement of the SCH shareholding together with the investment in Bank of China will result in no net change in total capital. There will be an increase of around 0.1% in RBS's Tier 1 capital as a result of the profit on the SCH shares sold.

The transaction with Bank of China is expected to be completed by the fourth quarter of 2005. RBS expects its Tier 1 ratio to exceed 7% at the end of 2005 on an IFRS basis (compared with 6.6% at 30 June 2005).

The transaction is expected to exceed our hurdle rate and be accretive from 2006.

Merrill Lynch International has advised RBS on this transaction.
 
 

Source:
The Royal Bank of Scotland
Media Relations
Carolyn McAdam +44 131 523 2055

Bookmark/Search this post with:

| | | | | | | | | | | | | | | | | |