Royal Bank of Scotland, the government-controlled bank, is in discussions to sell its £2 billion stake in Bank of China. Steven Hester, the bank’s new chief executive, met executives from the Chinese bank and regulators this week, according to reports last night.

It is understood that no final decision has been reached on whether to sell the 4.3 per cent stake, which was bought for £800 million in December 2005. RBS could expect to make a substantial profit from the sale. Selling the stake would be part of a plan to refocus RBS towards UK lending, after it was bailed out by the Government.

Mr Hester, formerly chief executive of British Land, announced a strategic review of RBS shortly after taking over as chief executive from Sir Fred Goodwin. It is currently 57 per cent owned by the Government after a capital injection in October.

The aggressive international expansion of Sir Fred’s years at the helm, including the purchase of ABN Amro in 2007 as part of a consortium, has been credited with contributing to the turmoil at RBS.

When UBS sold its 1.3 per cent stake in Bank of China at a profit of about $350 million last week, the Chinese bank said RBS had not notified it of any plans to sell its shares.

RBS has to give Bank of China one month’s notice if it intends to sell its stake, under the terms of its contract. A lock-in period, which expired last week, prevented RBS from selling the stake for more than three years after buying it.

RBS purchased the shareholding as part of a consortium, also including UBS, Merrill Lynch, Temasek of Singapore and Li Ka-Shing, Hong Kong’s richest man, which took holdings in Bank of China before it listed on the Hong Kong stock exchange. Mr Li Ka-Shing raised more than $500 million by selling part of his charity’s stake yesterday.

RBS declined to comment. In July, executives from the bank ruled out a sale. Immediately after RBS received a £20 billion capital injection from the Government in October, Bank of China reaffirmed its commitment to the strategic partnership with RBS.

Bank of China’s share price fell by 3 per cent in early Asian trading this morning as traders anticipated the disposal of RBS’s shareholding.

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