Between Bank of China's slumping Hong Kong-listed shares, down 63 per cent from the late 2007 peak, and sterling's crummy performance, RBS has barely washed its face on the $1.6bn investment. Nonetheless, selling now was a no-brainer. The Bank of China stake looked anomalous the minute UK taxpayers assumed control of RBS. It was bought three years ago when China began rolling back state ownership of banks; naturally, that did not mean replacing Beijing with Whitehall. Selling shortly after the lock-up period expired allows RBS to beat the rush (although UBS ditched its 1.3 per cent stake three weeks ago) of other strategic investors wanting to exit. It also means dodging the inevitable deterioration in Chinese banks' asset quality, earnings and share performance.
The risk is that RBS has jeopardised more than the time value of money. Quitting as the Chinese economy stutters is hardly a way to win favour in Beijing. RBS believes it is on a sure footing: it has learnt a lot and seen inside the corridors of power. Moreover it has a much-enhanced physical presence as a result of the ABN Amro takeover, which gave it 18 additional branches in China. For now, its ventures with Bank of China in credit cards, wealth management, insurance and global banking remain intact. Whether that continues once China has gleaned all it can from RBS remains to be seen. After all, as that wily old militarist Sun Tzu noted: “A wise general makes a point of foraging on the enemy.”