Mumbai: Royal Bank of Scotland Plc. (RBS) has begun the sale process of ABN Amro Bank NV’s retail and commercial banking assets in Asia, including India, by sending an information memorandum to three prospective buyers—Australia and New Zealand Banking Group Ltd (ANZ) Standard Chartered Bank Plc. (StanChart) and Hongkong and Shanghai Banking Corp. Ltd (HSBC)—a person familiar with the development said.
Moving forward: A file photo of the RBS headquarters in London. Chris Ratcliffe / Bloomberg
The information memorandum has classified financial details on ABN Amro’s Asian business that are not available in the public domain. This information will help the three suitors understand the health of the British bank before they submit bids.
These three banks are willing to buy the entire Asian operation of the Dutch bank, which is now a part of RBS.
ABN Amro has operations in India, Pakistan, Hong Kong, China, Taiwan, Malaysia, Indonesia, Singapore, Vietnam, Japan and Australia.
Responding to Mint’s queries, an RBS spokesperson refereed to the bank chairman Philip Hampton’s comment made during his recent visit to Mumbai, “the simplest way is everything goes to a single buyer paying the maximum price”.
“As with all transactions, we will not be commenting on any specific details until such times as we have an announcement to make to the market.”
Investment bank Morgan Stanley has got the RBS mandate to look for a buyer for its retail and commercial banking assets across Asia.
Paul Edwards, group general manager (corporate communications) at ANZ, in an email response said, “ANZ has a strategy to create a ‘super regional’ bank focused on the Asia-Pacific region, including priority markets in China and India. As part of this, we explore strategic opportunities from time to time. We do not comment on market speculation.”
StanChart spokesperson declined to comment on “market speculation” and HSBC officials were not available for comment.
According to an investment banker, RBS has classified the prospective buyers into three categories.
In the first category are those banks who have shown interest in buying the entire Asian operations; then there are others who are willing to buy the entire assets of ABN Amro Bank, including the global banking and markets business that RBS considers as core business and is not for sale; and finally, there are banks keen to buy the assets in specific countries.
The global banking and markets business is RBS’ wholesale and investment banking businesses, which include corporate banking, treasury operations, cash management, and export and trade finance, accounting for 70% of its business in Asia-Pacific.
Hampton had earlier said RBS’ long-term growth prospects are in these segments and “India is very critical here”.
“RBS has given preference to those banks who are interested in buying its entire Asian operations. If these banks are not able to meet the expectations of RBS in terms of valuation, then the bank may consider selling the business in bits and pieces,’’ said the investment banker, who did not want to be identified.
India is the most attractive market in RBS’s Asian business and the Indian central bank will have a say on the profile of the buyer.
RBS Group chairman Hampton met the Reserve Bank of India (RBI) brass in March to formally start the exercise.
In India, RBS is present through ABN Amro’s 31 branches and has 10,000 employees. Hampton had said that RBS would not need so many branches for its wholesale, investment banking and wealth management operations—the three businesses the bank will not sell—but he did not say whether it will sell branch licences or surrender them.
These branches are critical for the valuation of India assets of RBS as foreign banks do not find it easy to secure branch licences here even though RBI is quite liberal in granting such licences. Under the World Trade Organization norms, RBI is expected to issue 12 such licences a year. It issues about 14 licences every year, but foreign banks want many more as they want to expand their business in Asia’s third largest economy, which was growing at about 9% till last year.
“RBS could transfer all the 31 branch licences to the buyer of ABN Amro’s Asia business and then apply for a restricted banking licence to continue with the global banking and markets business,’’ said a senior foreign banker in Mumbai.
In the recent past, RBI had issued a restricted banking licence to American Express Banking Corp. (AEBC), to conduct business relating to credit cards, travel related services and institutional deposits of American Express Bank Ltd (AEBL), which was acquired by StanChart.
RBS, 70% owned by the UK government, announced a record £24.1 billion (Rs1.77 trillion today) loss for fiscal 2008 in February, the biggest in British corporate history.
The Asia business reported an operating loss of £113 million in 2008, against an operating loss of £20 million in the previous fiscal year.
The bank’s loan assets in India grew 28% to Rs36,617 crore in fiscal 2008, from Rs28,518 crore in 2007, but the India operations reported a 27% decline in net profit for 2007-08 to Rs280.60 crore, from Rs385.30 crore in the previous fiscal year.