Standard Chartered Plc's long-awaited marriage is a story of three decades of yearning never completed.
The final potential candidate is Barclays Plc, of which the Financial Times reports that it is investigating a merger (read acquisition) of StanChart. London-listed Barclays is not considering a possible deal, Reuters reported, citing two people near the lender.
In the case of a proposal, expect a polite but decisive rejection.
The deal may be In a PowerPoint presentation, it looks as if it would look reasonable, even sexy: Barclays is big in US investment banking, thanks to the acquisition of most of Lehman Brothers Holdings Inc.'s American businesses. in the wake of the financial crisis. It also has a great UK and US credit card business. Standard Chartered's strengths lie in Asia and Africa, the two growth areas in the banking sector, and it fits in well with Barclays' geographic hole. StanChart also has a hefty deposit franchise in Hong Kong and Singapore, where it is big in mortgages.
Why do not synergies work? For one thing, regulators frustrated with shotgun banking weddings after 2008 are unlikely to reach an agreement that would create an institution with a combined market value of more than $ 80 billion. Also the shareholders (on both sides) should not bless the union. And they were right.
Barclays board members may have worked out this plan to fend off 5.4% owner Edward Bramson because the activist shareholder may require a lot of capital to return. That's something banks are doing now when they see growth. As we noted earlier this month HSBC Holdings Plc is also repurchasing to grow into areas such as insurance and fintech.
These are real plans. How will Barclays Chairman John McFarlane, who is fighting years of not-so-overwhelming performance, justify StanChart as a ticket to opportunities in Asia and Africa?
McFarlane, former CEO of Aviva Plc and CEO of the Australia & New Zealand Banking Group Ltd., was a major advocate of Asia in his previous incarnations, but he also overseen the closure of most of Barclays' Asian operations two years ago. He also sold the Africa operations, though the FT notes that this sale "pulled his guts out."
Barcey's chief executive officer, Jes Staley, a former JPMorgan Chase & Co. banker, like his StanChart colleague Bill Winters, is two and a half years into the job of trying to repair the London bank. But unlike Winters, he has not shown any results yet. A regulatory champion in trying to get a whistleblower has not made him popular with shareholders. Maybe Barclays investors will support the deal to trade Staley for Winters? That would be an expensive CEO job.
As far as StanChart is concerned, Winter's turnaround begins to work, but only just. It is unclear why Singapore's state-owned investment company Temasek Holdings Pte, the largest StanChart shareholder, would accept a sale if valuations are still low. In addition, Barclays' weight in the UK retail market does not extend to other countries in Europe. A merger of the two, and Winters landing the top job, would give him a much bigger, but also an unwieldy bank.
Such a deal could have flown in 2004, but things are different now. What StanChart needs is a stronger presence in Commercial Banking in the US and a partnership with a FinTech player to increase its lead in trade finance, which may be the first banking activity to comprise Blockchain. For Barclays, merging with Credit Suisse Group AG to capitalize on its wealth management business could make more sense than shielding credit card defaults, which must rise as rates rise. Barclays sold its private banking business in Asia in 2016 because it was not to scale.
StanChart should stay alone. In 1986, Lloyds Bank Plc defeated the attempt to acquire emerging lenders by three tycoons, including Singapore-based financier Khoo Teck Puat, whose shares were ultimately acquired by Temasek. In 2001, StanChart CEO Rana Talwar fired amid rumors the ex-Citibanker was ready to consider informal approaches by Lloyds and … Barclays. Since the financial crisis, Spain's Banco Santander SA and New York-based JPMorgan have been named as potential buyers. Also owned partly by Temasek DBS Group Holdings Ltd. in Singapore is another frequently mentioned purchaser. DPS CEO Piyush Gupta, however, is probably happier to buy digital businesses to increase shareholder returns.
If Barclays should try his luck, StanChart should also hire this latest admirer.
This column does not necessarily reflect the opinion of the editors or Bloomberg LP and its owners.
To write to those responsible for this story:
Matthew Brooker at [email protected]