Standard Chartered's Woes Could Lead to Takeover, CLSA Says

  • DBS seen as potential acquirer, should bank's struggles deepen
  • Standard Chartered's `road to recovery' may take years: CLSA

Standard Chartered Plc, the U.K. bank whose share price has more than halved in the past two years, may attract takeover offers should it struggle to turn itself around, CLSA Ltd. said.

The most likely acquirer for the London-based lender is Singapore’s DBS Group Holdings Ltd., which would be able to bolster its presence in cities such as Hong Kong and Singapore, and gain access to markets in Southeast Asia, CLSA analysts Asheefa Sarangi and Lester Lim wrote in a report on Thursday. There is “no basis to the report, and it’s not on our agenda,” a DBS spokesman said in an e-mail. A Standard Chartered spokeswoman declined to comment.

The U.K. lender’s Chief Executive Officer Bill Winters announced plans in November to bolster a bank reeling from losses tied to bad loans after commodity prices slumped and economies from China to India cooled. The CEO has scrapped a second-half dividend, unveiled plans to restructure or exit $100 billion of risky assets, and said the bank plans to cut 15,000 jobs to help save $2.9 billion by 2018.

“The bank’s road to recovery will likely be a challenging multi-year journey,” the CLSA analysts said. The worse the situation gets, “the more likely it is that a white knight will eventually emerge,” they said.

Standard Chartered’s shares slumped 56 percent in London in the two years through yesterday. Its stock in Hong Kong sank 60 percent in the period, and climbed 3.2 percent to HK$63.80 as of 3:43 p.m. local time on Friday.

The CLSA analysts cut forecasts for Standard Chartered’s net profit in 2015-2017. At the same time, they boosted their 12-month price target for the Hong Kong stock to HK$62 from HK$58, citing the possibility of a takeover bid. The analysts upgraded the stock to underperform from sell.

DBS could bid as much as HK$80 per share, or the equivalent of 0.7 times the lender’s book value, Sarangi and Lim wrote. That would compare with the bank’s valuation dipping below 0.5 times this week, they said.

According to the analysts’ calculations, DBS wouldn’t want as much as 37 percent of the U.K. bank’s loan book, for reasons of risk or because the credit is in non-key markets. Loans could be sold, reduced or written off, they said.

DBS would need more information on Standard Chartered and its outlook, including in relation to risk weightings and nonperforming loans, before making an offer, they said.

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