Abu Dhabi's FAB not considering StanChart bid that would have placed it in world's top 10

Shares of emerging markets-focused lender surged by about 11% on speculation of a possible takeover bid

An entrance at the Standard Chartered Plc headquarters in London, UK. Bloomberg

First Abu Dhabi Bank, the UAE's biggest lender, has denied media speculation that it is considering a takeover bid for Standard Chartered, after it revealed last month that it evaluated making an offer but abandoned the move which, if successful, would have made it among the top ten banks globally by market value.

In regulatory statements to the Abu Dhabi Securities Exchange and the Stock Exchange of Hong Kong, FAB said it had noted “recent press speculation in relation to Standard Chartered and reiterates that it is not evaluating a possible offer”.

FAB is in a cooling period and is bound by UK and Hong Kong regulatory restrictions. According to last month's disclosure, it reserves the right to announce an offer or possible offer for Standard Chartered within six months of the previous announcement based on several factors.

These include an agreement of the board of Standard Chartered; if a third party announces a firm intention to make an offer for the lender, if Standard Chartered “announces a Rule 9 waiver proposal for the purposes of the UK Code or a 'whitewash' proposal for the purposes of the HK Code”; and/or if there has been a material change of circumstances (as determined by the Panel on Takeovers and Mergers and the Takeovers Executive of the Securities and Futures Commission of Hong Kong).

FAB said last month that it had “previously been at the very early stages of evaluating a possible offer for Standard Chartered … [and was] no longer doing so”.

The shares of Standard Chartered, which had more than $864 billion of assets at the end of September 2022, gained about 11 per cent at the close of trading on Thursday, driven by media speculation of a renewed takeover bid by FAB.

Standard Chartered's shares are up about 35 per cent over the past year. The bank will release its full year 2022 results on February 16.

Standard Chartered had a market value of about $22 billion as of Friday while FAB's market capitalisation was about $43 billion, with managed assets of more than Dh1.1 trillion ($313 billion) at the end of the third quarter of 2022.

A merger of the two banks would have created the 10th-largest bank globally by market value, alongside the Industrial and Commercial Bank of China, China Construction Bank, China Merchants Bank, JP Morgan Chase, Bank of America, Wells Fargo, HSBC, Citigroup, BNP Paribas and Banco Santander, according to The National's calculations.

In a research note last month, investment bank EFG Hermes said while the deal was “off the table, the takeaway is that FAB is serious about inorganic growth and is willing to flex its muscle if the opportunity arises”.

Standard Chartered, whose key market Asia makes up 68 per cent of its revenue and 58 per cent of its assets, would have complemented FAB’s primarily Mena-focused business, EFG said.

“FAB has delivered sector-leading loan growth in 2022 and has enviable liquidity,” EFG Hermes said.

The bank's management “is prudently building provision buffers to shield against risks from high [interest] rates. It has a better track record relative to the sector in managing asset quality pressure and its balance sheet is more skewed towards low-risk segments”.

With oil prices reaching a 14-year high in March of last year, Gulf lenders flush with cash, have looked beyond their local markets and are expanding their footprint regionally and internationally.

FAB, which was created in 2016 after the merger of National Bank of Abu Dhabi and First Gulf Bank, has expanded beyond the UAE market.

Last year, it completed a merger of Bank Audi Egypt with its Egyptian operations, consolidating its market position in the most populous Arab country.

FAB opened a representative office in Iraq last year and had made a non-binding offer to buy a majority stake in Egypt's largest investment bank EFG Hermes but withdrew its bid due to “ongoing global market uncertainty and volatile macroeconomic conditions” at the time.

Last year, FAB opened its first branch in China, offering wholesale banking services to corporate and financial institution clients in China and the Asia-Pacific Region.

In October, Saudi National Bank, the largest lender in the kingdom, said it was investing up to $1.5 billion in the troubled Credit Suisse, for a stake of up to 9.9 per cent.

In 2019, Emirates NBD, Dubai's largest lender, acquired Turkey's fifth-biggest bank Denizbank for $2.8 billion.

FAB's net profit rose 7 per cent to a record Dh13.4 billion ($3.65 billion) last year on higher interest income and strong performance of its core business as the UAE's economy expanded at the fastest pace in more than a decade.