On Thursday, January 05, 2023, First Abu Dhabi Bank (FAB), the largest lender in the United Arab Emirates, announced that it had considered making a bid for Standard Chartered, a London-listed bank, but has decided against it.

FAB stated that it had only been in the initial stages of evaluating a potential offer for the emerging markets-focused bank.

The news caused Standard Chartered bank’s shares to rise by as much as 20%. Standard Chartered however did not provide any comment on the matter.

“Given that StanChart has traded at relatively undemanding multiples for some time, as well as the fact that it has the benefit of a material surplus capital position, it is not surprising that it is seen as a takeover target.”
John Cronin, Analyst at Goodbody

Many factors would have made it difficult for FAB to successfully acquire Standard Chartered, including regulatory issues and the possibility of opposition from US authorities due to Standard Chartered being a major dollar clearing bank.

Additionally, the combination of FAB and Standard Chartered would be subject to stricter capital requirements, which would burden the resulting lender, according to a banking source.

Under UK and Hong Kong takeover rules, FAB is also prohibited from making a bid for Standard Chartered within the next six months without the consent of Standard Chartered’s board or the presence of a competing takeover.

Aforetime, Standard Chartered, a global bank operating in 59 markets with approximately 85,000 employees, had difficulty increasing its revenue in recent years.

In resolving this, CEO, Bill Winters focused on repairing the balance sheet and cutting jobs in the early part of his tenure.

In October 2022, StanChart stated that rising interest rates would improve its income and allow it to raise its revenue goals despite a weakening global economy.

There have been multiple rumors in the media over the past decade about Standard Chartered being the subject of a takeover, with Barclays and JPMorgan among the potential suitors mentioned, but no deal has ever materialized.

About the Two Banks, FAB and StanChart

Standard Chartered “is a bank, while domiciled in the UK, primarily focused on Asian, African and Middle Eastern markets,” said Stuart Cole, head macro economist at Equiti Capital.

FAB, on the other hand was created through the merger of National Bank of Abu Dhabi and First Gulf Bank in 2016. In the past few years, it has focused on implementing the changes resulting from the merger and rebranding its branches.

“Given the pessimistic outlooks for the UK, US and EU at the moment, a take-over would give the buyer instant access to these largely developing and emerging markets and could therefore be seen as a good move strategically.”
Stuart Cole