The Royal Bank of Scotland last night made its largest disposal since being bailed out by the taxpayer, selling its aircraft leasing arm to Japan's second-largest bank for £4.7bn.
Sumitomo Mitsui Financial Group beat off competition from China Development Bank and American lender Wells Fargo to land Dublin-based RBS Aviation, which owns 206 aircraft and has another 87 on order.
The timing of the sale could not be better for RBS, which is 83 per cent owned by the British taxpayer. The Edinburgh-based bank is heading for a showdown with the Government over plans to pay big bonuses to key executives. They include the group's chief executive, Stephen Hester, who can take some credit for this disposal.
Since his appointment in 2008, Mr Hester has been attempting to shrink RBS's balance sheet by dismantling the empire built by his predecessor, Sir Fred Goodwin. But the scale of the challenge and the market turmoil sparked by the eurozone crisis means that the Government is still a long way from recouping the £45bn spent on the rescue.
RBS Aviation, established in 2001, grew to become the world's fourth-largest aircraft leasing company behind General Electric and insurer AIG. RBS originally put the business up for sale in 2009 but the auction was put on hold after the economic crisis sent the aviation industry into a tailspin.
Lessors make money by buying aeroplanes and leasing them to airlines for a monthly fee, profiting when the aircraft is sold after 10 to 15 years.
"The fact that this substantial transaction, the largest ever sale of an aircraft leasing company ever undertaken, has been executed so successfully in such a challenging market is a great testament to the quality of the business that we have built up under the RBS Group's ownership," said Peter Barrett, division's chief executive.
So far, some £160bn of assets have been sold or wound down on Mr Hester's watch. Last week, RBS announced plans to scale back its investment banking activities after the Government voiced concern that risky lending and state ownership should not be mixed.
At a cost of 3,500 jobs, RBS said it would sell or close its cash equities, deal advisory and corporate broking arms, including the stockbroker Hoare Govett, which was inherited with the disastrous deal to buy the Dutch lender ABN Amro. However, it will remain active in fixed-income, debt capital raising and foreign exchange. Also in the pipeline are plans to sell or demerge its insurance division, which includes the motor insurer Direct Line.
"Reaching agreement on a deal of this scale in such a volatile market is a significant success for our non-core division and a credit to SMBC," said the RBS finance director, Bruce Van Saun. "This transaction further evidences our progress in reducing our non-core portfolio and returning the group to a position of strength."
Funds from the transaction will be used to strengthen RBS's balance sheet.