First Abu Dhabi Bank says it has considered an offer for StanChart

First Abu Dhabi Bank (FAB) (FAB.AD), the largest lender in the United Arab Emirates, said on Thursday it considered a bid for London-listed Standard Chartered (STAN.L ), but no longer did so.

Bloomberg reported earlier that FAB had been exploring a takeover bid for Standard Chartered as part of a plan to build an emerging markets bank, sending Standard Chartered shares up 20%.

The stock pared gains and closed up 7 percent after FAB said it was no longer seeking a potential deal.

The Abu Dhabi lender said it had been in the “early stages of evaluating a possible offer” for the emerging markets-focused lender.

Standard Chartered declined to comment on Thursday.

“Given Standard Chartered has traded at a relatively low price-to-earnings ratio for some time, and it has a large excess capital position, it’s no surprise that it’s seen as a takeover target,” said analyst John Cronin . Good shape.

Regulatory complexities and the fact that U.S. authorities may object to the takeover of a key dollar-clearing bank mean any deal would be difficult to materialize in reality, Cronin said.

Additionally, a proposed merger of FAB and StanChart would be subject to more onerous capital requirements, which would put a burden on the ultimate lender, a banking source said.

According to takeover rules in the UK and Hong Kong, FAB cannot bid for Standard Chartered Bank within the next six months without the approval of the British bank’s board of directors, or in the absence of a competitor’s takeover.

“Timing is everything and in the medium term it’s a good time to be looking at the banks,” said Trevor Green, head of U.K. equities at Aviva Investors, a top 20 investor in Standard Chartered’s equities, according to Refinitiv data.

“However, shareholders will not be willing to walk away from the business without an appropriate bid premium.”

A Standard Chartered bond investor, who asked not to be named, said the developments showed widespread interest in buying strategic assets at discounted valuations, but such deals were not easy to execute.

regular rumors

Standard Chartered, which operates in 59 markets around the world and employs about 85,000 people, has struggled to grow its balance sheet and cut thousands of jobs in recent years after chief executive Bill Winters repaired his balance sheet and cut thousands of jobs early in his tenure. income.

The bank said in October that rising interest rates should boost its revenue, enabling it to raise revenue targets amid a weakening global economy.

Standard Chartered has been the subject of sporadic takeover rumors in media reports over the past decade, with potential suitors including Barclays and JPMorgan Chase & Co listed as targets of such reports, but no deals have ultimately been struck.

Stuart Cole, chief macroeconomist at Equiti Capital, said Standard Chartered “is a UK-based bank that is primarily focused on markets in Asia, Africa and the Middle East”.

“Given the current pessimistic outlook in the UK, US and EU, an acquisition could be seen as a good move strategically as it would give buyers immediate access to these largely developing and emerging markets,” Cole said.

Sovereign wealth funds and banks have sought deals amid a weakening global outlook as rising oil prices following Russia’s war on Ukraine fueled a boom in the Gulf region.

The National Bank of Saudi Arabia announced in October that it will invest up to US$1.5 billion in Credit Suisse, with a shareholding ratio of up to 9.9%.

FAB was formed in 2016 from the merger of the National Bank of Abu Dhabi and First Gulf Bank. FAB has been realizing the fruits of the merger over the past few years and revamping its branches with new brands. About half of the lender’s deposits come from the Abu Dhabi government, which reported total assets of AED1.15 trillion ($313.1 billion) at the end of September 2022.

Reuters