RBS gets nod to buy stake in China's Suzhou Trust

By George Chen and Pily Zou

SHANGHAI (Reuters) - Royal Bank of Scotland Group (RBS.L) has won approval from Chinese regulators to buy a nearly 20 percent stake in Suzhou Trust as it expands in corporate banking and wealth management services in China, sources with direct knowledge of the situation said on Friday.

Suzhou Trust, a mid-sized trust and investment firm based in Suzhou, a prosperous manufacturing and tourism centre in eastern China, will issue new shares to RBS in a private placement, said the sources, who declined to be identified because they were not authorised to speak to the media.

The sources declined to give financial details, but Suzhou Trust's chairman has said it had more than 7 billion yuan (513 million pounds) of assets under management at the end of 2007.

A foreign institution can hold no more than 20 percent of a Chinese trust company, while overseas investors can have a combined stake of up to 25 percent, according to Chinese rules.

"Suzhou Trust wants the money to boost its capital base, while RBS is eager to secure a Chinese partner, so they both get what they want through the deal," said one of the sources.

"Why a trust company? Because nowadays a trust company can offer a very broad platform for many financial investments and for offering a wide range of financial services to clients," he added.

The Chinese banking regulator approved the deal at the end of last month and an official joint announcement by the two companies is expected in the next few weeks, the sources said.

A spokeswoman for RBS in London declined to comment and no comment was available from Suzhou Trust.