By Sharlene Goff and Andrew Parker
Royal Bank of Scotland last night finalised the sale of its aircraft leasing business to one of Japan?s biggest banks for $7.3bn in the biggest single disposal since the state-backed bank?s government bail-out in 2008.
The deal with Sumitomo Mitsui Financial Group was struck after months of talks with a number of interested buyers, including China Development Bank, the state-owned lender, and Wells Fargo, the US bank.
For RBS, it ends a two-year attempt to sell a business that leases around 250 commercial jets to airlines round the world. RBS was forced to halt early plans to dispose of the division in 2009 after asset values plummeted.
While the aviation business has been a profit engine for the bank, it has particularly onerous funding requirements, making it difficult to retain as RBS moves to reduce its exposure to the wholesale markets. RBS is set to record a profit of about $300m on the sale over the book value of the business.
The division was founded in 2001, when RBS acquired International Aviation Management Group – a small aircraft advisory and finance business – as a first step into the lucrative aircraft leasing business. It was moved into RBS?s non-core division three years ago.
The business attracted strong interest from international banks and private equity buyers as it is expected to provide long-term stable returns as long as the owner can meet the funding requirements.
Sumitomo is thought to have offered one of the highest prices and convinced RBS that it would be best placed to complete the transaction, according to people familiar with the sale.
RBS said the proceeds would further strengthen its core tier one capital position.
The sale would be the largest yet for Rory Cullinan, who heads RBS?s non-core division and has whittled down its unwanted assetsfrom ?258bn in 2009 to less than ?100bn.
? The Financial Times Limited 2012