The logic for selling now, as lock-up periods expire, is compelling. In all, foreign banks spent about $9bn accumulating stakes during the privatisation of China's big three lenders three years ago. Although the Hong Kong-listed shares have fallen sharply from their 2007 peaks, strategic investors are still comfortably in the money. Shares in Bank of China, which are below the initial public offering price, would still yield a gain of about $1.3bn for RBS based on Wednesday's close. Chinese bank prices have further to fall as decelerating economic growth hits loan books. Lending is likely to expand at a less hectic pace, while asset deterioration will inevitably rise. Big government bond holdings means that interest rate cuts, some of which reduce net interest margins, also pummel treasury returns.
The conundrum for would-be sellers is how to exit without alienating Beijing. Ultimately all need to be in the market. But sellers are even less likely to be welcomed when times are tough. Chinese authorities intervened over Bank of America's planned sale of shares in China Construction Bank. UBS was in a better position because it does not have myriad joint ventures like other strategic investors. Nonetheless, UBS's rivals must be taking heart from the fact it managed such a smooth exit, finding buyers and keeping Beijing sweet. Next step: how to emulate that in 2009.
