StanChart sinks teeth deeper into Asia
HONG KONG, May 27 (Reuters) – Indian mobile firm Bharti Airtel’s bold attempt to take control of South African rival MTN for around $20 billion was noteworthy for several reasons, including the bank advising it.
Of all the big western firms scrambling to get in on Asia’s largest deals, it was Standard Chartered Plc that guided Bharti on what would have been India’s biggest foreign acquisition. Talks failed over the weekend, however.
UK-based emerging markets specialist Standard Chartered, known as a leader in Asia’s loan market, is moving quickly to grab market share in Asia for corporate advisory business — an area long dominated by investment banks such as Goldman Sachs and UBS.
StanChart is among a handful of western banks to emerge largely unscathed from the meltdown in credit markets and in a position to take business and key personnel from rivals.
“They’ve obviously been someone we think could become a regional champion,” Kuo-Chuan Kung, a founding partner of private equity firm MBK Partners, told Reuters last month.
StanChart makes three-quarters of its profits in Asia.
Much of its recent growth has been in India, where profits jumped 71 percent last year on its wholesale banking business. It’s also plugging into trade flows from Africa, Asia and the Middle East, launching an Africa-Asia trade desk in Dubai.
An established force in syndicated loans — it was top-ranked in Asia ex-Japan last year — it has been a bit player in M&A, ranking 24th in Asia M&A league tables, advising on $2.7 billion worth of deals so far this year, according to Thomson Reuters.
Although CEO Peter Sands has said the bank is not diverting from its strategy, it seems ready to pounce on others’ turf.
“We do see opportunities arising from the turbulence in the financial markets,” Sands told a Hong Kong media conference in April. “One of the opportunities is to hire some exceptional talent and strengthen our leadership, particularly in the wholesale banking business.”
StanChart’s advisory ambition was evident in March, when it hired two well-known, and probably expensive, bankers in Asia, naming Sean Wallace as its group head of corporate finance and Charles Alexander as its regional head of origination and client coverage for North East Asia.
Wallace was a senior investment banker at JPMorgan and Merrill Lynch, joining StanChart from Franklin Templeton’s private equity arm; Alexander headed Lehman Brothers’ corporate finance business in Asia.
StanChart is not the only bank striking amid the turmoil.
JPMorgan made the boldest swoop, taking over a free-falling Bear Stearns British bank Barclays Plc recently hired a team from ABN AMRO to build up advisory in Asia and the Middle East.
Media reports last month said France’s BNP Paribas, another bank with few subprime headaches, was the lead contender to buy Bank of America’s equities prime brokerage unit.
BRAGGING RIGHTS — AND MORE?
Had the Bharti deal succeeded, StanChart would have soared into the regional top five for M&A bragging rights, symbolising its forward push while so many peers are going backwards.
StanChart’s London-listed shares are up around 35 percent since end-January, easily outperforming a 7 percent drop in the DJ Stoxx European bank index In February, the bank posted a $4 billion 2007 profit and gave an upbeat forecast.
With its emerging market strengths and a market capitalisation of around 25 billion pounds ($50 billion), StanChart is often cited as a takeover target, although it does not come cheaply and subprime-battered foes in the West are in a poor position to make a move.
StanChart trades at 15 times 2008 earnings, while larger rival HSBC trades at 12.5 times.
“You could say the market pays a premium for growth,” said one analyst covering the company, who did not want to be named.
Few expect StanChart to become a Wall Street-style equity shop. The bank has historically favoured fixed income and loans, but it clearly sees the current industry crisis as an opportune time to build out its offerings.
“Investment banking and corporate finance is an increasingly vital part of the bank,” Charles Cheng, head of China corporate advisory for Standard Chartered, told Reuters during China’s Boao Forum last month.
As for M&A and corporate advisory, “Standard Chartered bank might be perceived as quite low-key sometimes,” he said.