First Abu Dhabi bank backs away from Standard Chartered bid

First Abu Dhabi Bank said on Thursday it had considered a possible bid for Standard Chartered but was no longer interested in acquiring the emerging market lender.

FAB “was previously in the very early stages of evaluating a potential bid for Standard Chartered” but “no longer does so,” the agency said in a statement.

The merger of one of the Middle East’s largest banks with StanChart would have created a lender worth more than $1 trillion.

StanChart’s shares initially rose 20 percent after a Bloomberg report that a deal was under review, but that gain was trimmed to 7 percent after the Bank of Abu Dhabi said it had halted its pursuit.

The UK-based bank, which operates in 59 markets across Asia, Africa and the Middle East, has struggled for years with falling revenues and extremely low interest rates, and has been mired in geopolitical tensions between the US and China.

Run by former JPMorgan exec Bill Winters since June 2015, StanChart has been consistently rumored as a takeover target, including for Barclays in 2018.

Winters inherited a struggling bank after rapid, unchecked expansion in emerging markets under his predecessors led to years of high loan losses and falling earnings.

Forced to drastically trim the balance sheet and rein in risk-taking, it has since faced a major challenge to restore income growth and profitability.

Recent rate hikes have brightened the outlook and improved performance, as has the end of zero Covid restrictions in key Hong Kong and Mainland China markets.

However, shares remain depressed, having plunged more than a third during Winter’s tenure. StanChart trades at a discount of 60 percent to the book value of its assets, giving it a market capitalization of around £20 billion.

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

The Saudi National Bank recently agreed to buy a 9.9 percent stake in Credit Suisse after a series of crises meant the Swiss lender needed a capital injection at a low valuation.

While FAB’s market value of $52 billion is much higher than StanChart’s, the UK lender has more than double the assets with total assets of $864 billion versus $312 billion.

Each transaction would also have been complicated from a regulatory standpoint, considering how many jurisdictions StanChart operates, including the UK, Hong Kong, Singapore, and India.

Under UK takeover rules, FAB is barred from making any further bids for six months after the formal termination of its holding, unless a competing bidder comes forward.

The largest shareholder of StanChart is the state investment fund Temasek from Singapore with a stake of 16 percent. Abu Dhabi’s sovereign wealth fund, Mubadala, owns about half of FAB, which was formed in 2016 when the country merged its two largest lenders, National Bank of Abu Dhabi and First Gulf Bank.

FAB has in recent years envisioned expansion beyond the UAE, particularly into investment banking.

Last year, the lender made an offer for a majority stake in Egyptian investment bank EFG Hermes, but withdrew the offer citing uncertain market conditions. The bank is chaired by Sheikh Tahnoon bin Zayed al-Nahyan, who is also the UAE’s national security adviser, and its managing director is Hana Al Rostamani. First Abu Dhabi bank backs away from Standard Chartered bid

Adam Bradshaw

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