Bloomberg News

RBS Rebuilds in Asia After Equity Rank Fell in Retrenchment

June 07, 2011

(Updates with RBS stake in Samsonite in 15th paragraph.)

June 8 (Bloomberg) -- Royal Bank of Scotland Group Plc plans to expand operations in China and rebuild its Asian equity capital markets unit after the workforce at its corporate and investment banking operations in the region dropped last year.

RBS targets revenue growth of 15 percent to 20 percent at its global banking business in the Asia-Pacific region this year, Matthew Kirkby, the head of the unit, said in a June 1 interview. Revenue in China may rise at double that pace, he said. The workforce at Kirkby’s division fell by about 20 percent in 2010.

Kirkby, 42, said he’s hired more than 40 investment bankers in the Asia-Pacific region this year as RBS aims to get more work helping companies sell stock and bonds and offer them services such as takeover advice and cash management. The bank slumped in Asian equity underwriting following its 2008 taxpayer bailout, as dealmakers left after the U.K. government forced RBS to curtail compensation.

“We had too many people with the wrong skill sets,” said Kirkby, who moved to Hong Kong from London in January. “So we’ve prioritized two things -- the two big ones for me in 2011 are getting China right and rebuilding our ECM business.”

Edinburgh-based RBS tumbled to 32nd place in arranging stock sales in the Asia-Pacific region this year from 14th in 2009, according to data compiled by Bloomberg. Bankers including John Sturmey, Patrick Ngan and Stanley Ho left the equity capital markets team last year just as companies in the region issued record amounts of stock.

Other departures in 2010 included Raymond Yin, co-head of investment banking for China.

‘Less is More’

The bank first focused on expanding its debt capital markets and equity derivatives businesses in Asia, concentrating efforts on a smaller number of clients to whom RBS could sell a variety of products, Kirkby said.

RBS ranks ninth in arranging bond sales denominated in dollars, euros and yen in the Asia-Pacific region outside Japan this year, its best showing since the takeover of ABN Amro Holding NV in 2007, Bloomberg data show. It is second in sales of yuan-denominated bonds in Hong Kong, behind HSBC Holdings Plc, the data show.

RBS also is the top arranger of foreign-currency bond sales by Indian companies this year, topping Citigroup Inc., according to Bloomberg data.

“Historically, this organization has tried to do too many things,” said Kirkby. “Less is more. We’re doing fewer things a lot better than we were doing a year ago.”

China Venture

Kirkby was tapped by John Hourican, head of RBS’s global banking and markets division, in September to move to Hong Kong and rebuild the Asian investment banking operations and integrate them more closely with the markets business. He kept the position as global head of corporate finance.

RBS in April hired Sherry Liu from JPMorgan Chase & Co. as chairman and chief executive officer of its China operations, and it plans to hire several more senior bankers there this year, Kirkby said. Zhu Qing joined RBS as a managing director and head of China energy and resources banking this week. He previously worked at JPMorgan for four years.

Since Liu joined, RBS was picked to help China Power New Energy Development Ltd. sell 500 million yuan ($77 million) of bonds, and helped arrange a $150 million offering of convertible debt for China Power International Development Ltd.

The company last month announced a Chinese securities venture with Guolian Securities Co. The Hua Ying Securities Co. venture will allow RBS to manage stock and bond sales in China, enabling it to compete directly for underwriting business with rivals including Goldman Sachs Group Inc. and UBS AG in the country.

Samsonite IPO

Samsonite LLC, the U.S. luggage maker in with RBS holds a 30 percent stake, selected the lender and three other banks to underwrite an initial public offering in Hong Kong that may raise as much as $1.5 billion. RBS also helped arrange a $700 million stock sale by Seoul-based OCI Co., the world’s second- biggest polysilicon maker.

A setback came last week when Resourcehouse Ltd., Australian billionaire Clive Palmer’s unprofitable iron ore and coal company, canceled plans to sell stock in an IPO in Hong Kong for the fourth time in two years. RBS was among four banks working on the deal.

The lender hasn’t underwritten any overseas stock sales by Chinese companies this year, Bloomberg data show. It worked on four such deals in 2010 and three the year before.

“We still have a lot of work to do in China,” Kirkby said, adding that the revenue contribution RBS gets from the country is “too low.”

--Editors: Philip Lagerkranser, Mohammed Hadi

To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net

To contact the editor responsible for this story Philip Lagerkranser at lagerkranser@bloomberg.net


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