The Royal Bank of Scotland (RBS) is poised to announce the sale of about £1.8 billion of shares in the Bank of China.

RBS is expected to sell the entirety of its 10.8 billion-share stake, and despite what Hong Kong analysts characterised as a huge “loss of face”, is likely to walk away with a substantial profit of about £700 million on the investment it made in 2005.

RBS’s disposal of the stake is understood to relate directly to the greater level of control exerted over its operations by the British Government.

The stake in the Bank of China was a strategic holding that formed a central pillar of RBS’s push into the Chinese banking and corporate lending scene.

The international expansionism is thought to have been reined in substantially in recent weeks.

Banking industry sources said that, should RBS eventually decide to return to China in a significant way, that entry will be more expensive and complex after today’s stake sale.

The sale has emerged amid a sudden exodus of Western banking investment from the Chinese financial sector, and analysts are warning of further such transactions to come.

In late December, UBS, the Swiss bank, sold its entire 1.5 per cent stake in Bank of China, and last week Bank of America sold a 2.5 per cent stake in China Construction Bank.

Analysts have warned that a substantial portion of the $50 billion (£34 billion) of capital invested by financial groups in Chinese banking may be poised to desert.

The investment exodus is driven by two factors.

First, Western banks remain desperate for capital, and their stakes in China represent an easy way to raise money fast.

Second, the outlook for Chinese banks is worsening as the economy comes to terms with plunging exports and the closure of factories throughout the country’s industrial heartland.

Sandra Cai, a Daiwa Institute of Research analyst, warned investors to avoid the stocks of large Chinese banks.

She said that the risk of share overhang is rising if more and more foreign firms decide — or are effectively forced by capital shortages — to unload the shares they once intended to keep.

The share sales are expected to come as the owners become legally able to offload them.

The ending of the lock-up periods imposed when the stakes were bought arrive in an uneven trickle between now and 2011.

Goldman Sachs’s lock-ups in Industrial and Commercial Bank of China end in April and October this year.

Temasek, the Singaporean sovereign wealth fund, will be able to trade its shares in China Construction Bank in August.

The stake in Citic held by Mizuho, of Japan, is already tradable.

Added to the creeping mood of market unease is the reported sale this week of a two million share stake in the Bank of China by a fund controlled by Li Ka-shing, the billionaire Hong Kong tycoon, whose historic strokes of investment acuity have earned him the trading-floor nickname “Superman”.

Yesterday many dealers pointed to Mr Li’s timely trimming last year of his exposure to the global shipping industry, suggesting that there might be a parallel now with the Chinese banks.

Ning Ma, a Goldman Sachs financials analyst, said that the recent news could drive market fears of strategic stake sales by foreigners and that there would be better moments than now to buy into the sector.

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