Royal Bank of Scotland Group is expected to announce that it will pay roughly $2.5 billion for a 10 percent stake in Bank of China in the latest foreign investment in China's banking sector.
The long-awaited investment by Britain's second-largest lender would culminate a search by Beijing-run Bank of China for overseas partners that has lasted for more than a year.
Bank of China, one of the country's "Big Four" state lenders, is widely expected to float shares in 2006 and add other investors than RBS. The bank is the country's biggest foreign exchange lender, has around $560 billion in assets and roughly 12,000 branches.
In June, Switzerland's UBS said it was considering investing around $500 million in Bank of China.
China is keen to bring in foreign capital and expertise to a banking sector that boasts some US$1.5 trillion in personal savings, but is burdened by mountains of bad debt accumulated over decades of state-directed lending.
Edinburgh-based Royal Bank, which has been expanding in the US market, was expected to announce its deal on the same day that it is due to report interim results. The bank has made more than 20 acquisitions since transforming itself with the £21 billion Stg takeover of rival NatWest in 2000.
A spokeswoman for Royal Bank of Scotland declined to comment, as did spokesmen for Bank of China and UBS. Goldman Sachs, which is representing Royal Bank of Scotland, declined to comment.
RBS Chief Executive Fred Goodwin was in Beijing in late July, where he stayed at the Grand Hyatt Hotel, according to a hotel staff member, adding to widespread speculation that a deal is imminent.
In June, Bank of America struck a deal to pay $3 billion for 9 percent of China Construction Bank, which hopes to list in an overseas IPO later this year or in 2006.
Last year, global bank HSBC Holdings paid $1.75 billion for a 19.9 percent stake in number-five Chinese lender Bank of Communications and bought more shares in the bank's June IPO to maintain that stake.