UPDATE: RBS Strategy Edges Along With Asian Disposal

Royal Bank Of Scotland Group PLC (RBS) made further progress Tuesday in its plan to shrink its business and return to profitability with the $418 million sale of some of its Asian operations.

The bank, which is 70% owned by the U.K. government, unveiled plans in February to cut costs and sell its banking businesses outside of the U.K., Ireland and the U.S., as part of an effort to put it on sounder financial footing and eventually regain independence.

It is due Friday to report first-half results, which will include an update on that strategic plan.

RBS announced overnight that Australia & New Zealand Banking Group Ltd. (ANZ.AU) has agreed to buy its retail and commercial banking operations in Taiwan, Hong Kong, Singapore, and Indonesia, and its institutional businesses in the Philippines, Vietnam and Taiwan.

It said it is also in advanced talks about the sale of its businesses in India and China.

"The agreement represents substantial progress in RBS' announced strategic restructuring and allows improved visibility over the execution time frame, potential value creation and post-crisis RBS structure," brokerage Shore Capital said.

Shares in RBS rose as much as 4% on the news. At 1015 GMT, the stock was up 0.75 pence, or 1%, at 47 pence. RBS has been among the hardest hit by the financial crisis and global recession and its shares have lost more than two-thirds of their value in the last year.

Since the financial crisis threatened to topple the bank in October, it has sold its stake in Bank of China and January and raised EUR426 million in April from its 50% stake in Spanish insurer Linea Directa.

Those units, and the ones sold Tuesday, were among a set of "non-core" holdings equivalent to about 20% of the bank's total assets that have been earmarked for disposal in the next three to five years.

Other parts of the strategic plan include paring GBP2.5 billion from its cost base and radically restructuring its investment bank. For the first half, analysts are expecting a sharp rise in revenue at RBS' investment banking unit, but the gain will be offset by an expected quadrupling in loan impairments. The average first-half pretax profit estimate from a Dow Jones Newswires survey of five analysts is GBP1.3 billion.

While RBS had long flagged the likely sale of the Asian operations, it said in May that the overall pace of disposals would be slowed to make sure it got the best prices. Tuesday, it said the $418 million raised from the Asian operations is $50 million more than the assets' book value.

Meanwhile, the remaining India and China assets are expected to be sold to Standard Chartered PLC (STAN.LN). RBS said Tuesday discussions about the units are advanced, without naming the potential buyer, while Standard Chartered said Tuesday it is in talks about buying assets in the two countries.

Company Web site: www.rbs.com

-By Margot Patrick and Michael Carolan, Dow Jones Newswires; 44-20-7842-9451; margot.patrick@dowjones.com

(Aries Poon and Chester Yung in Hong Kong contributed to this report.)

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