RBS looks to sell ABN Asia and Charter One
Royal Bank of Scotland (RBS) is looking to sell Asian and US assets bought by Sir Fred Goodwin in the two biggest acquisitions he made as chief executive of the now-stricken bank.
RBS wants to offload all or part of the Asian operations it acquired when it bought ABN Amro in late 2007 for £10bn. The ABN deal weakened RBS as the financial crisis gathered pace and increased its exposure to toxic assets.
The bank is also hoping to sell its Mid-West US commercial banking business but to keep its retail banking operations on the East Coast.
Sir Fred added the Mid-West activities in 2004 when he spent $10.5bn (£7.3bn) on Charter One – a deal that set alarm bells ringing about his appetite for acquisitions.
RBS is understood to have sounded out Standard Chartered, the London-based Asian specialist, and Australia's ANZ about the Asian operations, which include prized assets in India.
RBS is understood to be considering selling retail banking operations while keeping licences and a wholesale banking foothold in key centres such as Hong Kong, Singapore, Japan and India. A deal in India with Standard Chartered, which is already the biggest international bank in the market, would allow it to do this.
RBS's Indian business, bought as part of the ABN deal, is the most desirable part of its Asian network because of the severe restrictions on opening branches in the country. Standard Chartered has about 90 branches and would gain 31 more in 21 cities if it bought RBS's operation.
ANZ sold its Indian business to Standard Chartered in 2000 and would need to acquire the licence to do a deal.
Finding a buyer for Charter One will prove to be a tougher task with the US's big banks in receipt of government bailout money and forbidden from making cash acquisitions. But RBS is said to have received at least one expression of interest.
Analysts value RBS's entire US retail banking operation at between $10bn and $15bn. Putting a value on the Asian businesses is extremely difficult, a banking analyst said.
The bank's desire to shed the businesses is a further blow to the legacy of Sir Fred, who built RBS into one of the biggest lenders in the world with a string of acquisitions before the credit crunch exposed the risks RBS was running with its balance sheet.
RBS said last month that it would write down up to £20bn for the value of past acquisitions in 2008, with ABN and Charter One making up the bulk of the charge.
Mike Trippitt, a banking analyst at Oriel Securities, said: "The Asian assets were sub-optimal in terms of profitability and weren't punching their weight. I have never bought into the idea that RBS would sell out of the US entirely. But in the Mid-West, where Bank of America now has a dominant presence, you either have to buy and get bigger or get out."
RBS added Charter One to its long-standing Citizens operation.
Stephen Hester, who took over from Sir Fred as the chief executive in November, has said that he will consider all options to shrink RBS back to a lower-risk, UK-focused bank. But he wants to maintain an international presence.
Mr Hester will announce the results of a strategic review next Thursday when the bank is expected to post a 2008 loss of up to £28bn including the goodwill writedowns. He will set out priorities in terms of which markets and businesses remain important to RBS, but with the detailed execution still to come.
Standard Chartered, which is relatively undamaged by toxic credit assets, has said in the past that it is still on the look-out for deals in Asia and would consider buying assets from RBS if they were for sale.
Standard Chartered raised £1.8bn in a rights issue in December. Oriel's Mr Trippitt said the bank was probably raising cash for an opportunistic deal with RBS or to buy other assets cheaply.
RBS declined to comment, but a source close to the bank said: "We will sell any business if we think there is a better owner who places a higher valuation on it than we do." Standard Chartered declined to comment.
HSBC might also be interested in the Indian business after Standard Chartered stole a march on its bigger rival with the ANZ deal.
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