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Tuesday, March 21, 2023

First Abu Dhabi Bank withdraws from bid for Standard Chartered

First Abu Dhabi Bank withdraws from bid for Standard Chartered

First Abu Dhabi Bank said on Thursday it had considered a potential takeover of Standard Chartered but was no longer interested in buying the emerging markets lender.

FAB said in a regulatory statement that it had “previously been in the early stages of assessing a possible offer for Standard Chartered” but was “no longer doing so”.

The merger of one of the Middle East’s largest banks with Standard Chartered would create a lender with assets of more than $1 trillion.

Shares in Standard Chartered initially rose 20 percent after Bloomberg reported it was exploring a deal, but pared gains to 7 percent after Abu Dhabi Bank said it had closed its bid.

The U.K.-based lender, which operates in 59 markets across Asia, Africa and the Middle East, has struggled for years with falling revenues and ultra-low interest rates, and has been mired in geopolitical tensions between the U.S. and China.

Standard Chartered has been run by former JPMorgan executive Bill Winters since June 2015 and has been rumored to be a takeover target, including from Barclays. 2018.

Winters took over a bank in crisis after rapid, unchecked expansion in emerging markets under his predecessor led to years of severe loan losses and falling revenue.

He was forced to drastically reduce his balance sheet and rein in his risk-taking, and has since faced the daunting challenge of restoring revenue growth and profitability.

Recent interest rate hikes have brightened the outlook, along with improved performance and the end of “zero-COVID-19” restrictions in key markets such as Hong Kong and mainland China.

Shares remained depressed, however, falling by more than a third during Winter’s tenure. StanChart is trading at a 60% discount to the book value of its assets, with a market capitalization of around £20bn.

By contrast, banks and investment funds in the Middle East have been buoyed by rising energy prices and are looking for international opportunities to deploy their cash reserves and diversify their economies away from oil.

national bank of saudi arabia Recently agreed to purchase After a series of crises, the Swiss lender needed capital injections at depressed valuations to take a 9.9 percent stake in Credit Suisse.

While FAB’s market capitalization is well above Standard Chartered’s $52 billion, the British bank has more than twice the size of Standard Chartered, with a $864 billion balance sheet compared with Standard Chartered’s $312 billion.

Any deal would be complicated from a regulatory standpoint, given that Standard Chartered operates in a number of jurisdictions, including the UK, Hong Kong, Singapore and India.

Under UK takeover rules, FAB cannot make another offer for six months after formally terminating its interest, unless a competitor emerges.

Standard Chartered Bank’s largest shareholder is Singapore’s state-owned investment fund Temasek Holdings, holding 16%. Abu Dhabi sovereign wealth fund Mubadala owns about half of FAB, which was formed in 2016 when the country’s two largest banks, Abu Dhabi National Bank and First Gulf Bank, merged.

FAB has set its sights on expanding beyond the UAE in recent years, particularly in investment banking.

Last year, the bank made a bid for a controlling stake in Egyptian investment bank EFG Hermes but withdrew its bid, citing uncertain market conditions. The bank is chaired by Sheikh Tanun bin Zayed Al Nahyan, the UAE national security adviser, and Hana Rostamani is the chief executive.

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