Proceeds from the deal will strengthen RBS’s core tier 1 capital position and reduce wholesale funding requirements, the Edinburgh-based lender said in a statement yesterday.

Sumitomo Mitsui fended off competing offers from China Development Bank Corp. and Wells Fargo & Co. for the assets, which RBS is selling as it reverses a decade of expansion. Led by President Koichi Miyata, the Japanese lender is eyeing assets of European banks to expand abroad as economic stagnation and low interest rates curtail profitability from domestic lending.

“It’s positive to see Sumitomo Mitsui obtain a business of this type, which generates higher profit margins than operations in its home market,” said Yoshinobu Yamada, an analyst at Deutsche Bank AG in Tokyo. “Japanese banks will be significant players in acquisitions of European assets going forward.”

Sumitomo Mitsui rose 0.8 percent to 2,212 yen at 9:43 a.m. on the Tokyo Stock Exchange. The benchmark Topix (TPX) index of shares gained 0.3 percent. RBS closed 1.3 percent higher at 24.4 pence yesterday in London.

The Tokyo-based banking group bid together with its Sumitomo Mitsui Banking Corp. lending unit and trading company Sumitomo Corp., according to the RBS statement.

Biggest Disposal

RBS, which received the biggest bank bailout in the world, is closing units and cutting more than 34,500 jobs. The disposal is RBS’s biggest since it received the 45.5 billion-pound ($70 billion) government rescue. Chief Executive Officer Stephen Hester has sold or wound down more than 160 billion pounds of assets since taking over from Fred Goodwin.

The bank said last week it plans to sell or close its cash equities, mergers advisory, corporate broking and equity capital markets operations at a cost of about 3,500 jobs worldwide.

Sumitomo Mitsui became the leading bidder after concern grew that state-owned China Development Bank (SDBZ) would struggle to gain government approval for a purchase in a timely manner, a person with knowledge of the talks said on Jan. 12. RBS was seeking to sell the unit for $6 billion to $8 billion, another person familiar said on Jan. 16.

Volatile Market

“Reaching agreement on a deal of this scale in such a volatile market is a significant success for our non-core division,” RBS Group Finance Director Bruce Van Saun said in an e-mailed statement yesterday. The disposal is expected to reduce the non-core division’s third-party assets by $7 billion on completion, RBS said.

Future order commitments of $3.7 billion will transfer with the business. Risk weighted assets associated with the Aviation Capital business are $2.5 billion. It is expected that the sale will complete before the end of the third quarter, conditional upon receipt of antitrust and regulatory approvals, RBS said.

Barclays Plc’s Barclays Capital unit and bankers from Sumitomo Mitsui’s Nikko unit are advising the Japanese bank on the deal, along with Milbank Tweed Hadley & McCloy LLP. Goldman Sachs Group Inc. and Clifford Chance LLP are counseling RBS.

Sumitomo Mitsui plans to buy “several hundred billion yen” of assets being sold by European lenders, President Miyata said in a December interview. The company has received 7 trillion yen ($91 billion) in offers from European banks including infrastructure project loans, he said.

Loans Grow Abroad

Sumitomo Mitsui’s banking unit increased lending abroad by 16 percent to 9.4 trillion yen as of Sept. 30 from a year earlier, company figures show. That compares with the bank’s total lending balance of 57 trillion yen, a 0.6 percent decline from a year earlier.

Lessors buy planes and then lease them to airlines for monthly fees, seeking to profit from the residual value by selling aircraft after about 15 years. RBS’s aviation business is one of the biggest plane lessors after General Electric Co. (GE)’s Gecas and AIG’s International Lease Finance Corp.

“I am very pleased that the Sumitomo consortium has agreed to buy the RBS Aviation Capital operating lease business in its entirety,” Peter Barrett, CEO of RBS Aviation Capital, said in a separate statement. “Our aim throughout the sale process was to attract a bidder with firm plans to help us grow our already strong platform and in Sumitomo we have found that.”

To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

http://www.bloomberg.com/news/2012-01-16/sumitomo-mitsui-to-acquire-rbs-aviation-leasing-division-for-7-3-billion.html

• U.S. Said to Seek More Than $10 Billion Penalty From BNP   (2014-05-30 09:35:40)
• Apple Agrees to Buy Beats Electronics for $3 Billion   (2014-05-29 09:42:30)
• JPMorgan’s Pinto Shuffles Deputies, Names Hernandez Unit Co-Head   (2014-04-08 08:55:29)
• JPMorgan Folds London Whale Office Into Another Unit   (2014-04-04 09:51:48)
• JPMorgan Folds London Whale Office Into Another Unit   (2014-04-04 09:51:29)
• JPMorgan Folds London Whale Office Into Another Unit   (2014-04-04 09:51:17)
• China Construction Bank Profit Beats Estimate on Margins   (2014-03-31 10:50:22)
• Madoff Aides Convicted in $17.5 Billion Ponzi Trial After Decades Working for Firm   (2014-03-25 13:24:38)
• Fed Revises Worst-Case Stress-Test Results for Biggest Banks   (2014-03-22 09:45:32)
• BofA, Citigroup, Credit Suisse Sued by FDIC Over Libor   (2014-03-15 10:32:09)