Bloomberg News

RBS Said to Be Near Sale of Aviation Unit to Sumitomo Mitsui

January 16, 2012

(Updates with RBS asset sales in fourth paragraph.)

Jan. 16 (Bloomberg) -- Royal Bank of Scotland Group Plc is close to agreeing to sell its aircraft-leasing unit to Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest bank by market value, for about $7.3 billion, said a person with knowledge of the talks.

RBS may sign an agreement within the next 24 hours, said the person, who declined to be identified because the talks are private. The Edinburgh-based lender was seeking to sell the unit for $6 billion to $8 billion, the person said.

Sumitomo Mitsui fended off competing offers from China Development Bank Corp. and Wells Fargo & Co. Sumitomo Mitsui became the leading bidder after concern grew that state-owned China Development Bank would struggle to gain government approval for a purchase in a timely manner, a person with knowledge of the talks said on Jan. 12.

At $7.3 billion, the disposal would be RBS’s biggest since it received a 45.5 billion-pound ($70 billion) government bailout, the biggest bank rescue in the world. Chief Executive Officer Stephen Hester has sold or wound down more than 160 billion pounds of assets since taking over from Fred Goodwin.

The bank said last week it plans to sell or close its cash equities, mergers advisory, corporate broking and equity capital markets operations at a cost of about 3,500 jobs worldwide.

GE, AIG

A spokesperson for Sumitomo Mitsui in Tokyo wasn’t immediately available to comment outside business hours. Officials at RBS declined to comment.

Sumitomo Mitsui plans to buy “several hundred billion yen” of assets being sold by European lenders, President Koichi Miyata said in an interview in December. The bank has received 7 trillion yen ($91 billion) of offers from European banks including infrastructure project loans, Miyata said.

Lessors buy planes and then lease them to airlines for monthly fees, seeking to profit from the residual value by selling aircraft after about 15 years. RBS’s aviation business is one of the biggest after General Electric Co.’s Gecas and American International Group Inc.’ International Lease Finance Corp.

--With assistance from Cathy Chan in Hong Kong. Editors: Edward Evans, Keith Campbell.

To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net

To contact the editors responsible for this story: Edward Evans at eevans3@bloomberg.net


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