RBS Asia sale throws up price, regulatory clouds

A Royal Bank of Scotland building in London in this April 7, 2009 file photo.

LONDON (Reuters) - Royal Bank of Scotland's (RBS) exit from its Asia operations could be less lucrative and more time consuming than some in the market may have been hoping.

The bank (RBS.L) is likely to fetch nearer $1 billion from the sale of its Asian assets than the $2 billion many had expected and regulators could throw up a series of hurdles for any bidders, people familiar with the matter say.

"Most of the markets are restricted, which is why some of the assets are attractive, but the risk that regulators will take a long look is a big negative," said one person familiar with the matter, who asked not to be named as the talks are confidential. RBS, 70 percent owned by the British government, is selling its Asian assets as it pulls back to core markets and is likely to raise between $750 million and $1.5 billion from the sale, industry sources say.

RBS has never said how much it expects. But media reports had said it could get between $1.8 billion and $2 billion and analysts at investment bank Macquarie last month estimated the price could be $2.5 billion, including RBS's Coutts private banking operations.

HSBC Holdings Plc (HSBA.L)(0005.HK), Standard Chartered Plc (STAN.L) and Australia & New Zealand Banking Group (ANZ.AX) are in the running for the assets after making informal bids, a person familiar with the matter told Reuters last week.

They are now looking at the businesses in more detail and first round bids are expected in May.

Edinburgh-based RBS is retrenching to its core businesses and plans to exit or shrink in up to 36 of the countries where it operates.

The Asian assets for sale include 28 branches in India, where RBS has more than 1.3 million customers; 20 in Indonesia, where it has the largest foreign-owned bank network; and 17 in Taiwan, serving over 1 million customers.

REGIONAL BASIS

Other operations are in Hong Kong, Singapore and Malaysia and include selected wholesale businesses.

RBS has said it wants to sell the assets as a regional business, which could be quicker and more certain than a series of country sales.

One worry is that any delay will lead to customer defections, especially among corporate clients. Other concerns are that slowing growth in Asia is feeding through to RBS's unsecured consumer lending portfolio, and staff have left.

India has been seen as the jewel of the assets on offer. But it is one of the countries where regulatory issues will be key. Tight restrictions on overseas banks are part of the attraction of winning the business, but transferring the assets to a new owner will face scrutiny and potential delay.

Banks with good relations with the regulator may get a smoother ride, but that may be offset by worries about a bigger footprint. Standard Chartered and HSBC are two of the biggest overseas banks there, with 90 and 33 branches respectively.

The process can also be unpredictable. In 2006, for example, the Reserve Bank of India blocked Standard Chartered's attempt to buy two branches from Bank of Bahrain and Kuwait, but a year later it was allowed to pick up branches through its purchase of American Express Bank.

In China, where RBS's 13 branches are seen as an attractive "bolt-on" purchase or a chance to grab a foothold, regulators have also taken tough stances on overseas ownership in the past.

Separate bids will be made for RBS's Pakistan business RBS.KA, which has 79 branches and is separately listed, with a market value of just over $300 million.

Three local companies have said they are interested and international banks are also expected to consider a move.

RBS acquired many of its Asian operations as part of its ill-fated takeover of parts of Dutch bank ABN AMRO in 2007.

Chief Executive Stephen Hester is reversing a 10-year acquisitive strategy by his predecessor, Fred Goodwin, as the company seeks to repay taxpayer cash, shrink its balance sheet, and put most attention on domestic lending.

RBS, which is being advised by Morgan Stanley, declined to comment. UBS and Goldman Sachs are advising Standard Chartered and Credit Suisse is advising ANZ.

(Additional reporting by Michael Flaherty in Hong Kong; Editing by David Holmes)