Hong Kong: Indian mobile phone services provider Bharti Airtel Ltd’s bold attempt to take control of South African rival MTN Group Ltd for around $20 billion (Rs85,800 crore) was noteworthy for several reasons, including the bank advising it.
Of all the big Western firms scrambling to get in on Asia’s largest deals, it was Standard Chartered Plc. that guided Bharti Airtel on what would have been India’s biggest foreign acquisition. Talks failed over the weekend, however.
UK-based emerging markets specialist StanChart, known as a leader in Asia’s loan market, is moving quickly to grab market share in Asia for corporate advisory business—an area long dominated by investment banks such as Goldman Sachs Group Inc. and UBS AG.
StanChart is among a handful of Western banks to emerge largely unscathed from the meltdown in global credit markets and in a position to take business and key personnel from rivals.
“They’ve obviously been someone we think could become a regional champion,” Kuo-Chuan Kung, a founding partner of private equity firm MBK Partners, said last month. StanChart makes three-quarters of its profits in Asia.
Much of its recent growth has been in India, where profits jumped 71% last year on its wholesale banking business. It’s also plugging into trade flows from Africa, Asia and West Asia, launching an Africa-Asia trade desk in Dubai.
An established force in syndicated loans—it was top-ranked in Asia ex-Japan last year—it has been a bit player in mergers and acquisitions (M&A), ranking 24th in Asia M&A league tables, advising on $2.7 billion worth of deals so far this year, according to Thomson Reuters.
Although chief executive Peter Sands has said the bank is not diverting from its strategy, it seems ready to pounce on others’ turf.
“We do see opportunities arising from the turbulence in the financial markets,” Sands had told a Hong Kong media conference in April. “One of the opportunities is to hire some exceptional talent and strengthen our leadership, particularly in the wholesale banking business.”
StanChart’s advisory ambition was evident in March, when it hired two well-known, and probably expensive, bankers in Asia, naming Sean Wallace as its group head of corporate finance and Charles Alexander as its regional head of origination and client coverage for North-East Asia.
StanChart is not the only bank striking amid the turmoil.
JPMorgan made the boldest swoop, taking over a free-falling Bear Stearns Companies Inc. British bank Barclays Plc. recently hired a team from ABN Amro NV to build up advisory in Asia and West Asia.
Media reports last month said France’s BNP Paribas SA, another bank with few subprime mortgage headaches, was the lead contender to buy Bank of America’s equities prime brokerage unit.
Had the Bharti deal succeeded, StanChart would have soared into the regional Top 5 for M&A bragging rights, symbolizing its forward push while so many peers are going backwards.
StanChart’s London-listed shares are up around 35% since end-January, easily outperforming a 7% drop in the DJ Stoxx European bank index. In February, the bank posted a $4 billion 2007 profit and gave an upbeat forecast.
With its emerging markets’ strengths and a market capitalization of around $50 billion, StanChart is often cited as a takeover target, although it does not come cheaply and subprime-battered foes in the West are in a poor position to make a move.
StanChart trades at 15 times 2008 earnings, while larger rival HSBC trades at 12.5 times. “You could say the market pays a premium for growth,” said one analyst covering the company, who did not want to be named.