18th Aug 2005 07:49
Royal Bank of Scotland Group PLC18 August 2005 RBS announces formation of strategic partnership with Bank of China RBS and Bank of China are pleased to announce that they have reached agreementto establish an exclusive strategic partnership. Within this partnership: • RBS and Bank of China have agreed to co-operate across a range of business activities, building on Bank of China's distribution strength and RBS's product skills in areas including credit cards, wealth management, corporate banking and personal lines insurance. • In addition, the two banks will establish close co-operation in certain key operational areas, including corporate governance, risk management, financial management, human resources and information technology. RBS will nominate a director to sit on the Board of Bank of China. • RBS will lead an investment of 10% in Bank of China for $3.1 billion (£1.7 billion). Within this, RBS itself will invest $1.6 billion (£0.9 billion). RBS and its co-investors have committed to retain their investment in Bank of China for three years. RBS has no plan to increase its investment in Bank of China. • Appropriate warranties and protections have been received • The transaction is subject to regulatory approvals Bank of China Bank of China, the second largest of China's big four banks, was established in1912. It traditionally focused on trade-related activities such as trade financeand foreign exchange, where it still has leading market shares. In 1994, Bank ofChina was converted from a specialised trade bank to a broadly-based state-ownedcommercial bank. In Mainland China, Bank of China has 11,307 branches and market shares of 12% ofloans and 14% of deposits. Bank of China has branches throughout Mainland China,but its activities are concentrated in the large cities in eastern China. Bankof China's brand appeals in particular to affluent personal customers and largecorporate customers. Bank of China is the most internationalised bank in China. It has subsidiariesin 27 countries including a strong presence in Hong Kong, where its subsidiaryBank of China Hong Kong has already been restructured and partially floated. Thevalue of the 66% of Bank of China Hong Kong owned by Bank of China is $14.8billion. In 2004, Bank of China's total income was $12.6 billion. At the end of 2004, itsassets amounted to $516 billion and its net asset value stood at $24.8 billion.Income, assets and net asset value are stated on a PRC GAAP basis. Bank of Chinahas about 238,000 employees. Over the last 4 years, Bank of China has grown its loans and deposits by 11% perannum. In August 2004, Bank of China was re-established as a shareholding company, with100% of its shares owned by Central SAFE Investments Limited. More information about Bank of China is available on www.bank-of-china.com. Commenting on the transaction, RBS Chairman, Sir George Mathewson, said: "The RBS Board believes that the size and growth of China represents animportant opportunity. We have been developing our relationship with Bank ofChina over the last 18 months, and have been impressed by the strengths of thebusiness and its compatibility with RBS. We regard our investment as animportant part of cementing our long-term relationship with Bank of China buthave no plans to increase our shareholding further. The combination of Bank ofChina's brand, distribution and customer base with RBS's product and operationalstrengths and experience will be powerful in the Chinese market. We are excitedby the potential of this partnership and look forward to working together in theyears to come to realise it." Bank of China Chairman, Xiao Gang said: "I am delighted that an investment agreement has been reached with RBS. With itsexperienced management, outstanding business strengths, well-establishedinternal control mechanisms and prudent management style, RBS is an idealpartner. The co-operation with RBS is a key step in our joint stock reform, andis crucial to transforming the operational structure, enhancing the internalmanagement, improving the competitiveness and promoting our profitability." Mr Wang Jianxi, Vice Chairman of Central SAFE Investments Limited, the majorshareholder of Bank of China, said: "Bringing in international strategic investors is an important step in thedeepening of the reform of state-owned commercial banks in China. Throughstrategic co-operation with RBS, Bank of China will be able to further enhanceits corporate governance and internal control. We are confident that thestrategic cooperation between Bank of China and RBS will produce positiveresults for both parties." Impact on RBS RBS will raise the £0.9 billion for its investment in Bank of China through thedisposal for £0.9 billion of its shareholding in SCH, which it has announcedtoday. The placement of the SCH shareholding together with the investment inBank of China will result in no net change in total capital. There will be anincrease of around 0.1% in RBS's Tier 1 capital as a result of the profit on theSCH shares sold. The transaction with Bank of China is expected to be completed by the fourthquarter of 2005. RBS expects its Tier 1 ratio to exceed 7% at the end of 2005 onan IFRS basis (compared with 6.6% at 30 June 2005). The transaction is expected to exceed our hurdle rate and be accretive from2006. Merrill Lynch International has advised RBS on this transaction. For further information Investor Relations Richard O'Connor +44 207 672 1758 Media Relations Carolyn McAdam +44 131 523 2055 +44 7796 274968 (mobile) There will be a conference call for the wires media only at 0800 UK time The live dial-in number is +44 207 026 5971 The replay number will be +44 207 784 1024; replay passcode 6047684# (availableshortly after the end of the conference call) There will be a conference call for analysts only at 0900 UK time UK dial-in number is +44 207 026 5971 UK Toll Free 0800 028 7843 US Toll +1 718 354 1193 US Toll Free 1888 893 9532 The replay number will be +44 207 784 1024; replay passcode 5474109# (availableshortly after the end of the conference call) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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