Always the bridesmaid, never the bride. Underperforming Standard Chartered has long been the subject of takeover speculation. This week First Abu Dhabi Bank confirmed it had been looking at the venerable lender. FAB decided instead to join the long list of potential suitors that have walked away. This includes Barclays, JPMorgan, Australia’s ANZ and others.
London-listed and domiciled, but focused on emerging markets in Asia; Standard Chartered and larger peer HSBC are legacies of Britain’s colonial past. That puts them in a tricky spot as geopolitical tensions between the east and west intensify.
Chinese shareholder Ping An wants HSBC to break itself up. Standard Chartered, a smaller presence in Hong Kong, has so far avoided hostile pressure.
The business was coping with the aftermath of risky lending and a money laundering and a sanctions-related fine when Bill Winters took over as chief executive in 2015. These issues are now largely in the past, but the bank only expects to return to a double digit return on equity next year. Analysts think that milestone is more likely in 2025, well behind peers.
Higher rates are providing a boost; net interest income rose almost 20 per cent in constant currency terms in the third quarter. Shares have enjoyed some re-rating too. But at 0.6 times tangible book, the valuation is still around half that of peers.
Standard Chartered is thinly spread across numerous markets. That is expensive. A cost-to-income ratio of 65 per cent is expected this year by Citi. HSBC has better scale and might manage closer to 50 per cent.
The lender is small, with equity worth just £20bn. Its historic brand as a trade bank is strong. It should be attractive to other bidders from the Gulf, an emerging east/west crossroads, even if FAB is no longer interested.
But regulators would have to approve a change of ownership at this systemically important bank. And UK politicians would expect a say in the matter. Given current tensions, a bidder would need diplomacy as well as ready cash to succeed.
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