Wednesday, March 4, 2009

RBS Said to Hire UBS to Explore Sale of East European Assets

By Ambereen Choudhury and Cathy Chan

March 4 (Bloomberg) -- Royal Bank of Scotland Group Plc, the biggest government-controlled lender in the U.K., hired UBS AG to explore a sale of its central and eastern European units as the recession hits the region’s banks, three people familiar with the plan said.

The bank may sell units in countries including Romania and Slovakia, said the people, who declined to be identified because the sale hasn’t been made public. UBS may sell the divisions one-by-one to lure buyers, said the people. A final decision to proceed with a sale hasn’t been taken so far.

RBS may struggle to sell the assets quickly as the worst slump since World War II cripples the ex-communist economies in the European Union’s east, sinking their currencies and driving Hungary and Latvia to tap international aid to avert default. Banks with operations in east Europe such as Austria’s Erste Group Bank AG may be downgraded because of their lending in the region, Moody’s Investors Service said last month.

“It’s business as usual in those countries where we may be exploring new ownership over time,” said Piers Townsend, an RBS spokesman in London. A spokesman for UBS declined to comment.

RBS expanded operations in East Europe through the takeover of Dutch lender ABN Amro Holding NV in 2008, which gave it operations in Poland, Romania and the Czech Republic. ABN Amro has operated in Poland since 1991 and provides banking and advisory services to companies. The bank also has 14 branches in Romania in cities including Bucharest, Brasov, Bacau and Galati. In Slovakia, the bank operates foreign exchange, bond and loan market services, according to its website.

RBS said it would scale back operations in 36 countries, two-thirds of its international presence, after posting the biggest loss in British corporate history last month. The bank also received a 20 billion-pound government bailout last year.

The Edinburgh-based bank plans to abandon or sell its retail and commercial banking operations in the Middle East and Asia. RBS plans to send sales documents to potential bidders for those divisions by March 9, the people said.

To contact the reporters on this story: Ambereen Choudhury in London at achoudhury@bloomberg.net; Cathy Chan in Hong Kong at kchan14@bloomberg.net

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