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I conduct research under the name and style of Financial Impact on Standard Chartered Bank For Acquiring Union Bank as Final Thesis of MBA from Preston University, Under supervision of Sir Raja Rubnawaz.
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FINANCIAL IMPACTS ON STANDARD CHARTERED BANK FOR ACQUIRING UNION BANK
TEHSEEN AHMED1532308004
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EXECTUIVE SUMMARY
I conduct research under the name and style of “Financial Impacts on Standard Chartered Bank for Acquiring Union Bank” under the supervision of Sir Raja Rabnawaz.
After collecting and analyzing the Financial Statements of the Standard Chartered Bank (SCB), I want to reveal that SCB is performing reverse aftermath of acquisition with Union Bank. I further analyzed to verify through all the financial aspects of the bank but it clearly shows that this acquisition is occurred just to comply the branches requirement of the State Bank of Pakistan (SBP).
The earnings of the SCB shows negative trend after acquisition. Return on Assets is declining with 50% average yearly. At the time of acquisition ROA was 3.2%, and in the very next year it become1.23% in 2007 then 0.27% in 2008 and 0.25% in 2009. In the same proportion Return on Equity as well as Return on Deposits is also declining steadily.
Profit after tax is also contracting because of enhancement in Non Performing Loans (NPLs) transferred from Union Bank Ltd.
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TABLE OF CONTENTS
S.NO PARTICULARS PAGE #
01 Title Page 1
02 Executive Summary 2
03 Introduction 3
04 Hystory 3
Financial Analysis
05 Profitability Analysis 6
06 Earning Analysis 10
07 Debt Management Analysis 12
08 Liquidity Of Bank Analysis 14
09 Solvency Of Bank Analysis 17
10 Conclusion 19
11 Recommendation 20
12 References 21
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LIST OF TABLES
S.NO PARTICULARS PAGE #
01 Profit After Tax 06
02 Net Interest Income 7
03 Non Performing Loan 7
04 Lending To Financial Institutional 7
05 Net Interest Income 8
06 Assets 8
07 Equity 8
08 Debt 8
09 Advaces 9
10 Investments 9
11 Return On Assets 10
12 Return On Deposits & Return On Equity 11
13 Debt to equity/ Deposit Time Capital/Debt to Assets 13
14 Earning To Assets / Advance Deposits. 15
15 Cost Of Fund Earning 16
16 Equity to assets/ equity to deposit/equity to earn. 18
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INTRODUCTION
Standard Chartered Bank is a British bank headquartered in London with operations in more than seventy countries. It operates a network of over 1,700 branches and outlets (including subsidiaries, associates and joint ventures) and employs 73,000 people.
Despite its British base, it has few customers in the United Kingdom and 90% of its profits come from Asia, Africa, and the Middle East. Because the bank's history is entwined with the development of the British Empire, its operations lie predominantly in former British colonies, though over the past two decades it has expanded into countries that have historically had little British influence. It aims to provide a safe regulatory bridge between these developing economies.
It now focuses on consumer, corporate, and institutional banking, and on the provision of treasury services—areas in which the Group had particular strength and expertise.
Standard Chartered is listed on the London Stock Exchange and the Hong Kong Stock Exchange and is a constituent of the FTSE 100 Index. Its largest shareholder is Temasek Holdings..
History
The early years
The name Standard Chartered comes from the two original banks from which it was founded and which merged in 1969 — The Chartered Bank of India, Australia and China, and The Standard Bank of British South Africa.
The Chartered Bank was founded by Scotsman James Wilson following the grant of a Royal Charter by Queen Victoria in 1853, while The Standard Bank was founded in the Cape Province of South Africa in 1862 by another Scotsman John Paterson. Both companies were keen to capitalise on the huge expansion of trade and to earn the handsome profits to be made from financing the movement of goods from Europe to the East and to Africa.
In those early years, both banks prospered. Standard Chartered Bank has a major branch in Kolkata. Chartered opened its first branches in Bombay, Kolkata and Shanghai in 1858, followed by Hong Kong and Singapore in 1859. With the opening of the Suez Canal in 1869 and the extension of the telegraph to China in 1871, Chartered was well placed to expand and develop its business.
In South Africa, Standard, having established a considerable number of branches, was prominent in financing the development of the diamond fields of Kimberley from 1867 and later extended its network further north to the new town of Johannesburg when gold was discovered there in 1885. Half the output of the second largest gold field in the world passed through The Standard Bank on its way to London.
Both banks – at that time still quite separate companies – survived the First World War and the Depression, but were directly affected by the wider conflict of the Second World War in terms of loss
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of business and closure of branches. There were also longer term effects for both banks as countries in Asia and Africa gained their independence in the ‘50s and ‘60s.
Each had acquired other small banks along the way and spread their networks further. In 1969, the banks decided to merge, and to counterbalance their existing network by expanding in Europe and the United States, while continuing their expansion in their traditional markets in Asia and Africa.
In 1986 Lloyds Bank of the United Kingdom made a hostile takeover bid for the Group.. The bid was defeated however it spurred Standard Chartered into a period of change, including a series of divestments notably in the United States and South Africa.
Recent alliances and developments
In 2000, Standard Chartered acquired Grindlays Bank from ANZ Bank, increasing its presence in private banking and further expanding its operations in India and Pakistan. [6] Standard Chartered retained Grindlays' private banking operations in London and Luxembourg and the subsidiary in Jersey, all of which it integrated into its own private bank. This now serves high net worth customers in Hong Kong, Dubai, and Johannesburg under the name Standard Chartered Grindlays Offshore Financial Services. In India, Standard Chartered integrated most of Grindlays' operations, making Standard Chartered the largest foreign bank in the country.
On 15 April 2005, the bank acquired Korea First Bank, beating HSBC in the bid. Since then the bank has rebranded the branches as SC First Bank.
Standard Chartered completed the integration of its Bangkok branch and Standard Chartered Nakornthon Bank in October, renaming the new entity Standard Chartered Bank (Thailand). Standard Chartered also formed strategic alliances with Fleming Family & Partners to expand private wealth management in Asia and the Middle East, and acquired stakes in ACB Vietnam, Travelex, American Express Bank in Bangladesh and Bohai Bank in China.
On 9 August 2006 Standard Chartered announced that it had acquired an 81% shareholding in the Union Bank of Pakistan in a deal ultimately worth $511 million.[9] This deal represented the first acquisition by a foreign firm of a Pakistani bank and the merged bank, Standard Chartered Bank (Pakistan), is now Pakistan's sixth largest bank.
On 22 October, 2006 Standard Chartered announced that it had received tenders for more than 51 per cent of the issued share capital of Hsinchu International Bank (“Hsinchu”), established in 1948 in Hsinchu province in Taiwan.[10] Standard Chartered, which had first entered Taiwan in 1985, acquired majority ownership of the bank, Taiwan’s seventh largest private sector bank by loans and deposits as at 30 June, 2006. Standard Chartered merged its existing three branches with Hsinchu's 83, and then delisted Hsinchu International Bank, changing the bank's name to Standard Chartered Bank (Taiwan) Limited). Prior to the merger, Hsinchu had suffered extensive losses on defaulted credit card debt.
In 2007, Standard Chartered opened its Private Banking global headquarters in Singapore.
On 23 August, 2007 Standard Chartered entered into an agreement to buy a 49 percent of an Indian brokerage firm (UTI Securities) for $36 million in cash from Securities Trading Corporation of India Ltd., with the option to raise its stake to 75 percent in 2008 and, if both partners agree, to 100 percent
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by 2010.[12] UTI Securities offers broking, wealth management and investment banking services across 60 Indian cities.
On 29 February 2008, Standard Chartered PLC announced it has received all the required approvals leading to the completion of its acquisition of American Express Bank Ltd (AEB) from the American Express Company (AXP). The total cash consideration for the acquisition is US$823 million.
On 12 September 2009, The Times newspaper in the United Kingdom reported that Standard Chartered had signed a record equaling £20million a season sponsorship deal with Liverpool FC to commence at the start of the 2010/2011 English Premier League season and last for four years, in a deal equally the record amount set by Manchester United's sponsorship deal with insurance giant A on. Liverpool football club announced on the club's official website on 14 September 2009 that Standard Chartered bank will be the new shirt sponsor starting from 2010 to 2014.
On 27 November 2009, Dow Jones Financial News reported the city of Dubai will restructure its largest corporate entity. Amongst international banks, Standard Chartered has one of the largest loan portfolios in the Dubai market and the UAE as a whole, estimated to be $7.77bn in total. This amounts to 4.2% of Standard Chartered's total loans outstanding. Other impacted banks included HSBC, Barclays, and RBS. However, Standard Chartered said that any impairment arising from this exposure would not be material.
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PROFATIBALITY
Aftermath of acquisition with Union bank, It is observed that Profit of Standard Chartered Bank (SCB) is suffering negatively.
Graphical Representation
Profit after Tax
It is observed that Profit after tax of SCB was growing with average rate of 25% before the acquisition but subsequently, it is declining steadily with huge percentages.
YEARS 2005 2006 2007 2008 2009
Profit After Tax 4507 5709 2767 630 669
Declining in Profitability is consequences of many factors.
Such as:
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Net Interest Income
SCB earned interest income of Rs.5276/ in 2005 with excellent proportionate but after acquisition in 2006 SCB earned 10336 and 16192 till 2007.
After Pervaiz Musharraf Regime, economy of Pakistan survived badly (High Inflation, High interest rates, unemployment, poverty, war against terrorism etc) causing which, borrower failed to pay off their loans and Ultimately, Interest income contracted to Rs.1419/- in 2008.
YEARS 2005 2006 2007 2008 2009
Net Interest income 5276 10336 16192 1419 16284
Non Performing Loans (NPL)
Impact of recession as well as change in sovereign of the country made borrower default and consequently enhancement in NPLs amount occurred volatility, Simultaneously, Interest income of the industry suffered.
YEARS 2005 2006 2007 2008 2009
NPLs 8421 10493 1534 21389 21389
Lending to Financial Institutions
SCB was not providing lending services to Financial Institutions before acquisition. But while acquiring union SCB had to provide Financial Institutional Lending and enhances financing to Financial Institutional accordingly.
While, Lending to Financial Institutions is safest and secured operation of the commercial than other individuals.
YEARS 2005 2006 2007 2008 2009
Lending to Financial Institutions 0 3873 15226 31467 20568
Non Interest Income
Non Interest income is usually collected in account of fee and services provided by the bank.
It is unbelievable that after the acquisition of SCB with the Union bank only non interest income of the SCB is increasing with a positive trend. It increase with the amount Rs.4433/- during five years and it
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is a positive sign of SCB for growing its business but also have many considerable things for increasing business.
YEARS 2005 2006 2007 2008 2009
Non Interest Income 2450 3687 6147 6566 6883
Assets
In result of acquiring union bank, SCB assets become doubled and the earning is declining as we discussed above. Consequently, Return On Assets declining steadily.
YEARS 2005 2006 2007 2008 2009
Total Assets 111688 246318 255545 264617 312874
Equity
The Equity means a stock or any other security representing an ownership interest. Or In balance sheet, the amount of the funds contributed by the owners (i.e. stockholders) plus the retained earnings (or losses).
The Equity of SCB is higher after acquisition with Union bank, the reason of the high equity is to acquire Union Bank shares as well as earning on lending to financial institutions.
YEARS 2005 2006 2007 2008 2009
Total Equity 8406 40230 40366 42757 47746
Debt
Debt shows the borrowed money by one party to another party, borrowing party take permission for borrow money from borrower under the condition that it is to be paid back at a later date, usually with interest.
The Debt of SCB indicates the greater proportion of the debt after the acquisition; the leverage of the bank shows the risk increases year by year and bank faces the greater debt load, the debt ratio helps to measure the financial health of the bank.
YEARS 2005 2006 2007 2008 2009
Total Debt 103262 206088 212479 221860 265128
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Advances
The Advances enhanced 3 times in 2006 because of acquiring Union Bank, while further next years it is declining because of tight monitory policy.
YEARS 2005 2006 2007 2008 2009
Advances 50215 129004 119537 125601 124447
Investments
Banks invest money in shape of financing to individuals and industries against interest, in indigenous and international stock markets and government treasuries. The SCB investment is increases gradually during the three years after acquisition with the union bank, because both banks investment joint together and shows higher investments but in the year 2008 it decline from Rs. 40696/- to Rs.29587 but the very next year it surged to Rs. 54198/-
YEARS 2005 2006 2007 2008 2009
Investments 25359 34629 40696 29587 83785
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EARNING RATIOS
Earnings Ratio shows the earning and returns on the Assets, Deposits and Equities of the bank. The SCB earnings ratios show its return after the acquisition with the union bank. The SCB has a very worse condition about returns during the five year after merger. The earning position of the bank is going down year by year and it shows bank do not get as much return as before.
Graphical Presentation
There are following Ratios shows earning of SCB after acquisition;
Return on Assets
Return on Assets percentage shows the negative return during the five years, the return on Assets is steadily low between 2005 and 2006. This negative figure indicates that performance on Union Bank assets is not sufficient.
YEARS 2005 2006 2007 2008 2009
Return on Assets (%) 3.9 3.2 1.23 0.27 0.25
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Return on Deposits
Return on deposit percentage is straight decrease after acquisition, the graph shows small decline in the year 2006 but it goes further down in the year 2007, 2008 and 2009. In the year 2005 the Deposit on return percentage is 5.39% but during the five years it goes down to 0.32% in the year 2009. The basic reason is enhancement in unnecessary Union Banks deposits and declining in investment market as well.
YEARS 2005 2006 2007 2008 2009
Return on Deposits (%) 5.39 3.64 1.56 0.36 0.32
Return on Equity
Return on equity measures the rate of return on the ownership interest of the common stock. It measures the efficiency at generating profits from every unit of shareholders' equity. ROE shows how well a business uses investment funds to generate earnings growth.
The Return of Equity of SCB shows the smaller return after merger with union bank and it decline with the passage of time the reason is that return on the assets and deposits is not as higher as before merger so the graph shows the decline stage of return on equity. The return on equity of SCB in the year 2005 was 53% (percent) but after acquisition it goes down with the huge percentage i.e. 30% (percent) in the year 2006, and the next year in 2007 the return on equity down with 17.79% (percent) and in year 2007 and 2008 the return on its lowest position i.e. 3.75% (percent) and 3.49% (percent).
YEARS 2005 2006 2007 2008 2009
Return on Equity (%) 53 30 17.79 3.75 3.49
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DEBT MANAGEMENT RATIO
Debt management ratios are use to measure the financial debt or leverage of the business. It indicates the riskiness of the business position. Debt Management ratios help to evaluate long-term solvency, measuring the extent to which the business is using long-term debt. Debt Management Ratios are use to attempt for measure the business use of Financial Leverage and ability to avoid financial distress in the long run. The stock holders are very interested and keeping eye on in debt management ratios because the debt or financial leverage can improve return to stock holders in good condition of the business but increase their losses in bad condition of the business.
In the Bank the debts use to indicate the possibility of financial distress and bankruptcy. These ratios are also known as Long-Term Solvency Ratios.
Graphical Representation
Debt to equity
Debt to equity ratio is the relationship between long-term funds provided by creditors and funds provided by owners. The debt to equity ratio indicates how much of a business financing is provided through debt as compared to equity. A debt-to-equity ratio is calculated by dividing long-term debt by owners' equity.
The Debt to equity ratio of SCB is higher at the time of acquisition in the year 2005 i.e. 12.28 but gradually it decreases in 2006 and 2007 which indicates conservative financing and low risk, results in fewer possibilities of large losses or large gains in earnings a small addition occurs in the year of 2008 and in the year 2009 the debt to equity ratio is 5.55.
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YEARS 2005 2006 2007 2008 2009
Debt to equity 12.28 5.12 4.93 5.19 5.55
Deposit times capital
A time deposit capital is a capital of the bank by collecting to the customer who wants to save their money at the particular time period in the bank. The banks deposit their money at the fix period and give interest on the deposit. The banks lend this capital by giving loans to other business and charge interest on the loans and earn profit. Different banks have different percentage of interest on time deposit capital.
A time deposit capital SCB is 9.95% (percent) in 2005 at the time of acquisition with Union Bank and suddenly its 3.9% (percent) goes down in the year 2006 and after that it slowly improve with the small percentage.
YEARS 2005 2006 2007 2008 2009
Deposit times capital 9.95 3.9 4.11 4.08 4.33
Debt to asset
The debt to asset ratio measures the business overall financial health. It is determined by dividing the total worth of the assets by the total debt. This ratio help to find the how many assets are financed on debt. If debt is higher this means that the business has too much risky.
Debt to assets ratio of SCB is 0.92 in the year 2005 at time of acquisition it slowly decrease after acquisition in the year 2006 and 2007 but it goes its lowest position in the year 2008 i.e. 0.54 but it goes back its same position in the year 2009 that was in the year 2007.
YEARS 2005 2006 2007 2008 2009
Debt to asset 0.92 0.84 0.83 0.54 0.83
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LIQUIDITY RATIO
Liquidity ratio, expresses a company's ability to repay short-term creditors out of its total cash. It shows the number of times short-term liabilities are covered by cash. If the value is greater than 1.00, it means fully covered.
Liquidity ratios attempt to measure a business ability to pay off its short-term debt obligations. This is done by comparing a business most liquid assets (or, those that can be easily converted to cash), its short-term liabilities.
In general, the greater the coverage of liquid assets to short-term liabilities the better as it is a clear signal that a company can pay its debts that are coming due in the near future and still fund its ongoing operations. On the other hand, a company with a low coverage rate means negative sign for investors as it may be the business will have difficulty meeting running its operations, as well as meeting its obligations.
Graphical Representation
Earning assets to assets
Earning assets means money that produce from the assets for a business without any work needing to be done. Earning assets include such things as stocks, bonds, certificates of deposit, and generally anything that earns interest or dividends.
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We can also say that any item of economic value owned by an individual or corporation, especially that which could be converted to cash. Examples are cash, securities, accounts receivable, inventory, office equipment, real estate, a car, and other property etc.Earning assets to assets of the SCB increased with the normal percentage after acquisition. At time of acquisition after 2005 there was no earning of SCB on assets to assets but the next year in 2006 it percentage is 68% and another next year it increase 0.66% that was the positive sign of SCB after acquisition and in the years 2008 and 2009 the increase percentage was 70.54% (percent) and 37.13%(percent) respectively.
YEARS 2005 2006 2007 2008 2009
Earning assets to assets 0 68% 68.66% 70.54% 73.13%
Advance to deposit
An advance to deposit is the amount of money required to secure a thing, facility or service prior to the event, usually an identified percentage of the total cost. And also the Money paid, usually by check or credit card before taking any service. The amount is generally given for specific period of time. The purpose of the advance deposit is to guarantee a reservation. The full amount is applied after completing the task.
The advance to deposit of SCB was zero at the time of merger with the Union Bank. The next year in 2006 advance on deposit percentage was 82.23% but during five years in the advance to deposit shows a greater or smaller fluctuation in the percentage, in the year 2007 the percentage was decrease 14.76% and it increase in the year 2008 just 4.49% but the next year in 2009 an other decline stage occurs and percentage was decrease 11.83% which was the greater decline after the year 2007.
YEARS 2005 2006 2007 2008 2009
Advance to deposit 0 82.23% 67.47% 71.96% 60.13%
Yield on earning assets
Yield on earning assets is one measure of a financial industry's solvency used by banking regulators. It looks at total interest, dividend and fee income earned on loans and investments as a percentage of average earning assets. The earning yield, in investment market related terminology is the percentage of pure earnings compared to what has been invested.
There was no earning yield on assets at the time of acquisition of SCB with Union Bank in the year 2005. In the next year in 2006 the yield on earning assets percentage is 8.70% and it increase in the year 2007 with 4.14% (percent) a very small decline occurs in the year 2008 i.e. 0.35% but in the year 2009 the percentage decrease with 0.84% (percent) this was the bit greater than the year 2008 percentage. Over the entire yield on earning assets was going up and down stages during the five years.
YEARS 2005 2006 2007 2008 2009
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Yield on earning assets 0 8.70% 12.84% 12.49% 11.65%
Cost of funding earning assets
Total interest expense paid on deposits and other borrowed money as a percentage of average earning assets.
Same as above liquidity ratios the cost of fund earning assets was zero of the SCB in the year 2005. In the year 2006 the percentage was 2.25% and gradually improvement occurs during five year after acquisition with the Union Bank. And it will increase in the years 2006 to 2007 with the percentage 2.25% to 4.53%.
YEARS 2005 2006 2007 2008 2009
Cost of funding earning assets 0 2.52% 3.61% 3.69% 4.53%
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SOLVANCY RATIO
The Solvency ratio is a way of the investors can measure the business ability to meet its long term obligations. Obviously if the business is going to go bankrupt no one wants to invest in it.
A measure of a business ability to service debts, expressed as a percentage. A high solvency ratio indicates a healthy company, while a low ratio indicates the opposite. A low solvency ratio further indicates likelihood of default. Different industries have different standards as to what qualifies as an acceptable solvency ratio, but, in general, a ratio of 20% or higher is considered healthy. Potential lenders may take the solvency ratio into account when considering making further loans.
Graphical Representation
Equity to assets (%)
The equity to assets ratio is one of the standard formulas used to ascertain the overall financial stability of a business. In essence, the function of the asset/equity ratios is to determine the value of the total assets of the business, less any portion of the assets that are owned by the shareholders of the firm. The amounts of assets that are owned by the shareholders is often referred to as owners equity or shareholder equity.
The Equity to assets ratio shows the relationship of the total assets of the firm to the portion owned by shareholders, also known as owners’ equity. An equity ratio depends importantly on the industry in which it operates its size, economic conditions, and other factors. There is no ideal equity to assets ratio in the banking industry. A relatively high ratio may indicate the business has taken on substantial
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debt merely to remain in business. In other words, there is a high return on borrowed capital exceeds the cost of that capital.
The Equity to Assets Ratio of SCB in the year 2005 is 7.53% (percent) and it increases in the year 2006 and 2007 with the percentage of 16.33% (percent) and 16.85% (percent). A small decrease show in the year 2008 with the percentage 0.69% and it declining is continue in the year 2009 with the percentage of 0.9%. Over all Equity to assets ratio was increase and decrease with the small percentage during the five years.
YEARS 2005 2006 2007 2008 2009
Equity to assets (%) 7.53 16.33 16.85 16.16 15.26
Equity to deposits (%)
The equity of deposits is increase during the five years after acquisition with the Union Bank the people did not deposits funds in these years because of the financial turmoil of the bank gives less interest on the deposits, so the equity were increase year by year. And increase in equity on deposits was the negative sign for the growing of bank.
YEARS 2005 2006 2007 2008 2009
Equity to deposits (%) 10.049 25.644 24.309 24.495 23.07
Earning assets to deposits (%)
Earning on assets deposits reveal the leverage of the bank over deposits.
It is constantly increasing against the performance of the bank, it might be because of the financial turmoil.
YEARS 2005 2006 2007 2008 2009
Earning assets to deposits (%) 90.35 106.77 99.04 106.93 110.55
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CONCLUSION
Considering the facts figures revealed in analysis, every ratio and percentage is showing negative trend in financial statements. It is very clear that after acquisition with Union Bank, Standard Chartered is suffering huge losses and it will continue unless it make profitability, comprehensive strategies for future period. Assets are higher consequently, return on assets and assets performance is showing low. Furthermore, Opportunity losses are enduring because of tight monitory policy as well as the increase in non performing loans.
After collecting and analyzing the Financial Statements of the Standard Chartered Bank (SCB), I want to reveal that SCB is performing reverse aftermath of acquisition with Union Bank. I further analyzed to verify through all the financial aspects of the bank but it clearly shows that this acquisition is occurred just to comply the branches requirement of the State Bank of Pakistan (SBP).
It is revealed that this acquisition is made just to overcome the minimum branches requirement.
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RECOMMENDATION
While analyzing the above mentioned datas, I highly recommend Standard Chartered Bank to sell unnecessary assets as well as provide financing to Financial Institutions instead of those industrialists who are already bankrupted in different other banks.
Investment strategy should be change because the position of Stock Market has no scope of return in future period.
Return on government treasuries is very low, that is why it should further invest through financing financial institutions and individual as well.
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Reference
Sale of Union Bank to Standard Chartered Bank in Process
Published on 5/17/2006
KARACHI (May 17 2006): The Standard Chartered Bank (SCB) has initialled an agreement with a Saudi combine to acquire 66 percent of its shares in the Pakistani listed Union Bank Limited for 513.76 million dollars.
The, deal upon conclusion, will be the biggest yet purchase in Pakistan's banking history. The Aga Khan Fund was the first to purchase 51 percent stake in Habib Bank for 400.95 million dollars.
SCB is the biggest foreign owned banking entity having 45 branches in 10 Pakistani cities. The acquisition of 338 million shares of Union Bank at 1.52 dollars per share will enable SCB to extend its Pakistan network to 24 cities. The Union Bank has 65 branches in Pakistan and two branches overseas.
After intimation for the intended sale is cleared by the State Bank of Pakistan, a team from SCB will commence due diligence exercise at Union Bank. Upon completion of the exercise, the sale-purchase agreement will be signed between the two parties.
UNION BANK: Former Prime Minister Nawaz Sharif's government had granted banking licence to a Lahore businessman, Nasim Saigol, along with nine licences to other private sector groups to re-enter banking in 1989. Saigol Family had a major stake in United Bank Limited which was nationalised by Zulfiqar Ali Bhutto's PPP regime on January 1 1974.
In its first inspection of Bank of Punjab - as a scheduled bank - SBP inspectors detected a
loan against the sponsors shares of Union Bank. Under SBP rules pledging of sponsor's shares in banks to obtain loans was disallowed, and SBP ordered the Saigol family to sell its managing stakes in Union Bank.
Dr Abdullah Basudaan, of Saudi Arabia, having investment in Pakistan in the chemical field (Nimer Chemicals) bought the 51 percent sponsor's stake for 12 million dollars and lodged the same in SBP in 1999. The balance sheet of Union Bank was 233 million dollars (Rs 14 billion) at the time.
In 2000 Pakistan's leading consumer banker, Shaukat Tarin, became the Chairman of the Bank. The bank not only acquired the franchise to market American Express Card (despite Amexco's presence in Pakistan), but soon went on a expansion spree. Tarin acquired the three branches of Bank of America for another 12 million dollars and also later acquired the branch network of Emirates Bank in Pakistan for 6 million dollars.
Under Tarin's leadership, Union became a major force in consumer banking with balance sheet base of over 2 billion dollars (Rs 122 billion), a growth of 45 percent in one year with advances and deposits increasing by 26 and 40 percent respectively and annualised earnings depicting a rise of 35 percent.
However, last year major differences emerged between the Saudi owners and the management on expenditure. The expense-to-revenue ratio was 47 percent in 2005.
Dr Abdullah's group and associates had increased their stakes from 51 percent to 74 percent to improve their voting strength for amalgamation of Bank of America's branch network. Later, the group reduced its stake by selling 8 percent shares for 12 million dollars. If this deal goes through, the group, in a span of
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six years, would manage to earn 28 times of the original investment, besides obtaining yearly dividends.
Standard Chartered Bank: After the freezing of foreign currency accounts in 1998, a number of foreign banks operating in the country sold out their banking licences and networks to either a local business concern or to another foreign owned entity.
Societe Generale sold to Kuwaiti Owned Al-Meezan Bank; Credit Agricole was bought by NIB; Mashriq Bank was purchased by Crescent Group; Bank of Ceylon's branch was taken over by Dawood Group and later sold to Atlas Investment Bank; and American Express Bank is being acquired by Jahangir Siddiqui Investment Bank.
Standard Chartered has a 140 years history in this part of the world. Originally, the Chartered Bank, became Standard Chartered after a merger of two British owned entities with large network in Asia and Africa in the 1980s. And later, ANZ Grindlays was also taken over by SCB making it the largest foreign banking entity in Pakistan.
Under its new country head, Badar Kazmi FY2005 has been a historic year, as SCB has expanded its network from 21 to 45 branches. Its balance sheet has increased from 1.5 billion dollars to nearly 2 billion dollars in just over a year.
The deposit base of the combined SCB/Union entity would be around Rs 175 billion and advances will total Rs 119.1 billion. After shedding expensive deposits in Union Bank amounting to Rs 9 billion and merging overlapping branches, the new entity should be able to drastically reduce Union's administrative expense, now amounting to Rs 3.2 billion, to Rs 1.5 to Rs 2.0 billion, making SCB in Pakistan an even more profitable entity.
Once the merger goes through after due diligence is completed, SCB will have to
corporatise its operations in Pakistan as Union Bank is a locally listed entity.
In FY2000 Pakistani authorities had invited leading OECD banks to come forward and bid in its privatisation process but there was no response.
The acquisition by SCB is likely to act as a catalyst for further banking acquisitions and renewed interest in Pakistan by reputable international banks. Second largest foreign entity (as per balance sheet), Citigroup is also expected to increase its branch network as well.
Negotiations for over six weeks have been under way between the representatives of Dr Abdullah Basudaan and Standard Chartered group in London. Earlier, Singapore's Tamasek Group, having stakes in NIB, had also made a bid to acquire Union's branch network after being outbid in the sale of ABL to the local Ibrahim Fibres Group. The stakes of Standard Chartered in Pakistan after the Union Bank acquisition will be larger than SCB's present stake in India, and is expected to make the Pakistani franchise an important contributor to SCB's bottom line.
Courtesy of Business Recorder
Standard Chartered acquires Union Bank
By Our Staff Reporter
KARACHI, Sept 5: Standard Chartered PLC announced on Tuesday that its subsidiary company, Standard Chartered Bank (Pakistan) Limited, has completed the acquisition of 95.37 per cent interest in Union Bank Ltd.
The bank said it had paid an amount of $487 million for the purchase of Union Bank.
Pursuant to the acquisition, Standard Chartered Bank will submit a scheme of amalgamation to
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the State Bank of Pakistan. On approval, Union Bank and Standard Chartered Bank would amalgamate into Standard Chartered Bank (Pakistan) Ltd, said a press release issued by the bank.
The release said Union Bank provided Standard Chartered with a significant opportunity for growth in both consumer and wholesale banking through product innovation, wider distribution reach and leveraging Standard Chartered’s international network.
”Our overriding priority will be to ensure that we maintain the highest standards of service for our customers. For customers of both banks, it will be business as usual until further notice,” said the release.
Badar Kazmi, chief executive officer, Standard Chartered Pakistan, said in a statement:
"I am delighted with the completion of the acquisition of Union Bank Limited. The merger with Union Bank demonstrates Standard Chartered’s commitment to Pakistan and presents tremendous opportunities. This acquisition is transformational for Standard Chartered in Pakistan. It will be beneficial for the customers in terms of our ability to provide value-added sophisticated products and services that match our customers’ needs.”
He added.
“It will also provide a strong platform for personal and professional development and growth to all staff across the bank,"
By Dawn News
Merger of Standard Chartered Bank and Union Bank
3rd January, 2007
Welcome to the "new" Standard Chartered Bank! Union Bank and Standard Chartered Bank have merged to become one bank. Now
your very own bank has 115 branches and a network of 119 ATMs in 22 Major cities in Pakistan.
Standard Chartered Bank started operations in Karachi in 1863. Our over 140 years of presence in Pakistan, and a historic investment in Union Bank is proof or our commitment and confidence in Pakistan and to you, our valued customer.
What does this "new" Standard Chartered Bank mean for you?
t is business as usual for you, as none of your existing banking relationships will change. Please continue using your regular branch for all your banking needs - as you have been doing in the past. Your account numbers, cheque book, ATM debit card, credit cards, loans etc, are all valid and can be used just as before. We will inform you well in advance of any changes in the future.
You immediately have access to 119 Standard Chartered ATMs without any additional charges. In the near future, you will have access to more innovative products and helpful services from the "new" Standard Chartered Bank. We will bring you the latest in financial services from around the world, so you can grow your wealth, borrow wisely and conveniently make your payments.
http://www.brandsynario.com/intl-news/911_merger-of-standard-chartered-bank-and-union-bank.aspx
Standard Chartered Bank, Pakistan. Complaints - Bad Banking / Incompetent Staff
Standard Chartered Bank, Pakistan.
27 May, 2009 By Asif Ali
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Bad banking / Incompetent Staff
I lost my HSMP (Highly Skilled Migrant Program) Visa to UK for their incometency during my bank statement verification prcedure from Brithsh High Comission last year.
Instead of being apologetic; they have started harassing through their legal department.
I have filed a case against SCB for their incompetency and ruining my career including ban to travel UK/EU for next 10 years under immigration laws of UK for submitting a non-genuine document (370(A))
This document (bank statment) was legally obtained from one of the SCB branch duly verified and stamped by the bank staff.
The account for which the statment was obtained; was officially opend by our company and it serves as my salary account.
This not all, sending billing of clared and cancelled credit cards yet another issue.
Since all my statment and all other documention is absolutely true and genuine; I am hopeful that I'll be provided justice in the court of law.
SCB indirectly harrasing for lengthy trial as per Pkistani court system norms. But I shall never deter and fight for justice legally and morally.
Asif Ali
http://www.boltaconsumer.com/complaints/standard-chartered-bank-pakistan-bad-banking-incompetent-staff
STANDARD CHARTERED ACQUISITION OF CONTROLLINGSHAREHOLDING OF UNION BANKFOR IMMEDIATE RELEASE
London, 09 August 2006 - Standard Chartered PLC (“Standard Chartered” or the“Bank”) announces that its subsidiary company, Standard Chartered Bank (Pakistan)Limited (“SCBP”), has entered into agreements to acquire an 95.37 per cent interestin Union Bank Limited (“Union Bank”) for a cash consideration of US$413 million (the“Acquisition”). The Acquisition is unconditional but before it can be completed, SCBPis obliged, pursuant to Pakistan law, to make a mandatory public offer (the “TenderOffer”) for the remaining shares of Union Bank. The Tender Offer is expected tocommence on or about 12 August 2006 and is expected to close on or about 1September 2006 (“Closing”). The Acquisition is expected to complete shortly afterClosing.KEY POINTS__The acquisition of Union Bank will make Standard Chartered the sixth largestbank in Pakistan by market share of assets and will further extend StandardChartered’s business in a high growth market. Standard Chartered currently hasa network of 46 branches in 10 cities. Pakistan is an integral part of StandardChartered’s Middle East and Other South Asia strategy and the acquisition willmake Pakistan Standard Chartered’s tenth largest geography by income.__The Pakistan banking sector has low penetration rates and a growing profit poolthat has doubled between 2004 and 2005. Union Bank provides StandardChartered with a significant opportunity for growth in both Consumer andWholesale Banking through product innovation and by leveraging StandardChartered’s international network.__Union Bank is the eighth largest bank in Pakistan by market share. It servesapproximately 400,000 retail customers through its extensive network of 65branches in 22 of Pakistan’s major cities, and operates a small but growingWholesale Banking business.__Union Bank has demonstrated an impressive period of growth since itsestablishment in 1991, particularly in the retail and Small and Medium Enterprisebanking market, where it now holds strong market shares in mortgages, credit
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cards, personal and auto loans. Union Bank benefits from a strong independentlocal management team with a wealth of experience from leading internationalbanks.__The combined entity of Standard Chartered and Union Bank will delivereconomies of scale, a more complete product set, a stronger operating platformand a wider distribution network.__The purchase price is 17.1 times Union Bank’s reported after tax earnings in2005 and 5.6 times its reported net asset value as at 31 March 2006.- 2 -__The acquisition of Union Bank is expected to be earnings accretive for StandardChartered in 2006.__Standard Chartered will finance the acquisition and tender offer through internalresources.Bryan Sanderson, Chairman of Standard Chartered, said:"Pakistan is a strongly growing country that is integral to Standard Chartered's MiddleEast and Other South Asia strategy. The acquisition of Union Bank will significantlyincrease Standard Chartered’s presence in this important market."Mervyn Davies, Group Chief Executive of Standard Chartered, said:"Standard Chartered is the leading international bank in Pakistan and Union Bank willmaterially enhance its market position. Union Bank has grown well under its strongmanagement team, and we will drive further growth by adding Standard Chartered'sproducts and processes as we have done successfully in other markets."- 3 -Pakistan and Union BankUnion Bank represents an opportunity for Standard Chartered to extend its existingfootprint in Pakistan and obtain a significant presence in a high growth market.Pakistan has shown real GDP growth of between 5.5 per cent and 8.5 per cent since2003. Standard Chartered forecasts an average GDP growth in excess of 6 per centevery year for the next five years. Standard Chartered estimates the banking sector
profit pool at USD 1,100 million in 2005, having doubled over the last year. The lowpenetration rates that exist in the sector (loan/GDP ratio of 30 per cent), and thedemographic profile, make Pakistan an integral part of Standard Chartered’s strategy.Union Bank is Pakistan’s eighth largest bank by market share of assets and has totalassets of USD 2 billion. The bank provides Consumer and Wholesale Bankingproducts through its nationwide network of 65 branches in 22 cities, and welldeveloped alternative channels, including call centres, internet and 37 ATMs.Union Bank is listed on the Lahore, Karachi and Islamabad stock exchanges. Thebank has performed strongly, having grown assets from USD 988 million to USD2,081 million between 2002 and the first quarter of 2006. Union Bank has anextensive customer base with 400,000 retail and SME banking customers, and asmall but growing wholesale banking business.Based on audited local GAAP accounts as at 31 December 2005, Union Bank had__Total assets of USD 2,009 million__Total advances of USD 1,201 million__Net assets of USD 91 millionFor the 12 months ended 31 December 2005, Union Bank reported profit before taxof USD 47 million and profit after tax of USD 30 million. For the equivalent period in2004, Union Bank reported profit before tax of USD 25 million and profit after tax ofUSD 15 million.Acquisition Rationale and BenefitsUnion Bank has an impressive track record of growth driven by a strong localmanagement team. Standard Chartered will look to further grow Union Bank in waysthat will include:__In Consumer Banking: Standard Chartered will introduce its multi-productsales model across Union Bank's network to improve productivity. StandardChartered will also add Wealth Management, Investments and segmentssuch as Bancassurance and Priority Banking to complement Union Bank'sexisting Consumer Banking expertise.__In Wholesale Banking: Standard Chartered has a strong Wholesale Bankingbusiness in Pakistan and can add significant value through a programme of
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product introduction and penetration of new customer segments hitherto- 4 -untapped by Union Bank. This will include expanding the product portfolio,for example Derivatives, Foreign Exchange, Transactional Banking, TradeFinance and Corporate Finance.The combined entity of Standard Chartered and Union Bank will deliver economies ofscale, a more complete product set, a stronger operating platform and a widerdistribution network.Approvals, Implementation and TimetableBefore the Acquisition can be completed, SCBP is obliged, pursuant to Pakistan law,to make the Tender Offer. The Tender Offer is expected to commence on or about12 August 2006 and is expected to close on or about 1 September 2006. TheAcquisition is expected to complete shortly after the closing of the Tender Offer.Further announcements in relation to the Acquisition and the Tender Offer will bemade as appropriate.- 5 -Note to editorsStandard Chartered - leading the way in Asia, Africa and the Middle EastStandard Chartered PLC is listed on both the London Stock Exchange and the Hong KongStock Exchange and is consistently ranked in the top 25 among FTSE-100 companies bymarket capitalisation.Standard Chartered has a history of over 150 years in banking and is in many of the world’sfastest-growing markets with an extensive global network of over 1,200 branches (includingsubsidiaries, associates and joint ventures) in over 50 countries in the Asia Pacific Region,South Asia, the Middle East, Africa, the United Kingdom and the Americas.As one of the world’s most international banks, Standard Chartered employs almost 50,000people, representing over 90 nationalities, worldwide. This diversity lies at the heart of theBank’s values and supports the Bank’s growth as the world increasingly becomes one market.With strong organic growth supported by strategic alliances and acquisitions and driven by itsstrengths in the balance and diversity of its business, products, geography and people,Standard Chartered is well positioned in the emerging trade corridors of Asia, Africa and theMiddle East.
Standard Chartered uniquely derives over 90 per cent of profits from Asia, Africa and theMiddle East. Serving both Consumer and Wholesale Banking customers worldwide, the Bankcombines deep local knowledge with global capability to offer a wide range of innovativeproducts and services as well as award-winning solutions.Trusted across its network for its standard of governance and corporate responsibility,Standard Chartered takes a long term view of the consequences of its actions to ensure thatthe Bank builds a sustainable business through social inclusion, environmental protection andgood governance.Standard Chartered is also committed to all its stakeholders by living its values in its approachtowards managing its people, exceeding expectations of its customers, making a difference incommunities and working with regulators.For more information on Standard Chartered, please log on to www.standardchartered.comFor further information, please contact:Romy Murray, Head of Investor RelationsTel: (44) 20 7280 [email protected] Farrell, Head of Media RelationsTel: (44) 20 7280 [email protected]
http://www.standardchartered.com/media-centre/press-releases/2006/documents/grp_20060809.pdf
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