Chillin' out till it needs to be funded
UBS has scored a first in – or rather, out of – China. The Swiss bank, in the dying embers of 2008, sold its 1.3 per cent stake in Bank of China. It netted a few hundred million dollars in the process. Other banks, including Royal Bank of Scotland and Bank of America, could rake in substantially more by selling their shares in Chinese lenders. Because both are recipients of state cash striving to bolster balance sheets, gains in excess of $1bn plus would presumably come in handy.
The logic for selling now, as lock-up periods expire, is compelling. In all, foreign banks spent about $9bn accumulating stakes during the privatisation of China’s big three lenders three years ago. Although the Hong Kong-listed shares have fallen sharply from their 2007 peaks, strategic investors are still comfortably in the money. Shares in Bank of China, which are below the initial public offering price, would still yield a gain of about $1.3bn for RBS based on Wednesday’s close.
zyakaira notes: i do hope these investments are not being sold in a hurry. For example many such investments in india are among the precious few profit-making ventures left with these global institutions. If these are also sold then the business model is unlikely to be able to recover!