RBS selling 1.8 bln pound Bank of China stake

By Tony Munroe and Steve Slater

HONG KONG/LONDON (Reuters) - Royal Bank of Scotland is selling about $2.4 billion (1.8 billion pounds) worth of shares in Beijing-controlled Bank of China on Tuesday, according to market sources and a term sheet for the deal seen by Reuters.

The move represents a partial retreat to its home market by RBS, which had been expected to sell the stake after the government took a 58 percent holding in the bank, hit hard by the credit crunch and the economic slowdown.

The bank is selling all of its 10.8 billion Bank of China shares at between HK$1.68 and HK$1.71 apiece, the term sheet showed, or a discount of 7.6-9.2 percent to Bank of China's closing share price of HK$1.85.

Bank of China said it is in talks with RBS about the sale, and an announcement on the deal was subject to communication between the two.

RBS -- which still has other operations in Asia as well as significant U.S. interests such as banking group Citizens -- would be the latest overseas investor to sell a stake in a Chinese bank and would reap a sizable profit on the 4.3 percent holding, which it bought in 2005 for $1.6 billion.

RBS declined to comment.

The sale is being handled by Morgan Stanley.

"It makes sense and it will crystallise a gain. It's not a stake that has strategic importance in terms of synergies for the group," said Ian Gordon, analyst at Exane BNP Paribas in London.