The Telegraph
Since 1st March, 1999
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China trio eye slice of StanChart pie

London, Nov. 19: Are Chinese financial institutions trying to get into India by buying a stake in Standard Chartered, the biggest foreign bank in India with 81 branches in 31 cities'

In London, where the bank has its headquarters, a spokeswoman would not comment on a weekend report in the Financial Times that three major Chinese banks had approached Temasek, the Singapore state investment agency, and offered to buy its 17 per cent stake in Standard Chartered.

“People familiar with the matter said officials of Industrial and Commercial Bank of China, Bank of China and China Construction Bank had in recent months made ‘informal and discreet’ contact with senior Temasek personnel about a possible deal,” the FT report said.

It added: “Temasek is understood to have rebuffed the advances because it considers its stake in StanChart to be of financial and strategic importance.”

This morning in early trading shares in UK-listed Standard Chartered were up 4.2 percent at 17.34 pounds, valuing the bank at 25 billion pounds (Dollar51 billion) and Temasek’s stake at about 4.3 billion pounds.

A spokeswoman for Standard Chartered would not be drawn on Chinese intentions.

“We do not comment on market rumours,” she told The Telegraph. “We have an excellent strategy and performance record and continue to perform well.”

Although Standard Chartered has its headquarters in London, 90 per cent of its profits come from operations in Asia (where banks have remained less affected by the “sub prime” mortgage crisis in the US), West Asia and Africa. It has 1,600 branches in 50 countries and employs 60,000 people.

It has historic links with Calcutta where it opened its first Indian branch on April 12, 1858. This was at a time when Calcutta was the most important commercial city in India and the hub of the nation’s jute and indigo trades. But with the opening of the Suez Canal in 1869 and the growth of cotton business, Standard Chartered shifted its main operations to Bombay.

The latest figures from Standard Chartered reveal that it made pre-tax profits of Dollar1.98 billion (Pound967 million) for its first six months trading to June 30, a 30 per cent increase on the same period last year. The bank also has a rapidly growing Islamic finance business branded Saadiq, which means “truthful”.

In China, Standard Chartered has 30 branches but plans to add another 10 by the end of the year. Income from its Chinese operation more than doubled in the first half of 2007.

“StanChart is attractive to the Chinese banks because of its profitable and expanding operations in Africa, the Middle East and Asia,” the FT explained. “Temasek is StanChart’s largest shareholder after acquiring an 11.5 per cent stake from the family of the late Khoo Teck Puat in 2006. It has subsequently increased its holding to more than 17 per cent.”

It said: “According to banking and regulatory sources in China, a further obstacle to a possible investment in StanChart is a belief among the Chinese that the bank’s (StanChart’s) leading executives would not welcome the transfer of the stake to another lender, as this could trigger speculation about its future independence.”

The paper also pointed out: “In recent months, Chinese banks have embarked on a wave of outbound merger and acquisition activity, including Industrial and Commercial Bank of China’s landmark agreement last month to acquire a 20 per cent stake in Standard Bank, Africa’s largest financial services group. Temasek holds stakes in more than 10 Asian banks, including just under 5 per cent of Bank of China and 6 per cent of China Construction Bank.”

One person with knowledge of the situation told the FT: “The (Chinese) banks have all tested the water about the Standard Chartered stake but Temasek has made clear that it is not a willing seller.”

A spokesman for China Construction Bank told the FT it had “no information that can be disclosed at this stage”, while spokesmen for the other two Chinese banks said they had not heard about a possible investment in Standard Chartered.

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