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Standard Chartered buys Grindlays Bank

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Will there be more mergers in the region?

May 01 - 07, 2000

Standard Chartered Bank and ANZ Grindlays Bank have signed an agreement whereby Standard Chartered will acquire the Grindlays business in the Middle East and South Asia and ANZ Grindlays' international private banking business. The total consideration is approximately of US$ 1.34 billion. The combined business will have around 9,000 employees and 116 branches in 17 countries in the region, with over 2.2 million customers. The deal will make the combined business the No.1 in the region and a strong No.2 in most of the countries in which it operates.

Zahid Rahim, Chief Executive, Pakistan, Standard Chartered Bank said, " This is a landmark transaction in the local banking industry and creates a premier international bank with substantially enhanced market share. We are extremely optimistic about our prospects here as we combine the strengths of our network, product and service competencies to create a client focused powerhouse. This is an ideal time to increase our investments in Pakistan and we are bullish about the country's future. We look forward to working closely with government, regulators, customers and our people to complete the integration process in a smooth and efficient manner."

Rana Talwar, Group Chief Executive, Standard Chartered PLC termed this acquisition completely in line with stated strategy and a significant step towards objective of becoming the world's leading emerging markets bank. The deal also emphasizes bank's commitment to develop its business in the Middle East and South Asia.

The acquisition of Grindlays will create the premier international banking business in the Middle East and South Asia. The deal combines two strong and complementary consumer banking franchises to build the leading consumer bank in the region and strengthen the corporate banking franchise through greater focus on multinational and large local companies.

Good economic growth rates are forecast for India and across the region and many believe that this is the right time to invest. This is an excellent opportunity to acquire a well-managed, quality business at the right price. This positions the new entity to take advantage as the region, with its rapidly growing middle class, opens up to commerce and new banking products.

The move follows the recent acquisitions of the UBS international trade finance business and another bank in Thailand, both of which have been successfully integrated into Standard Chartered. The Bank plans to pursue opportunities to develop its unique franchise.

The increase opportunities for the continuing development of Internet banking products in markets that offer enormous potential add to the strength of Standard Chartered's management resources to achieve significant synergy through operating efficiencies and revenue enhancements.

ANZ Chief Executive Officer said, "The transaction is attractive for both organizations. The move is good for shareholders, customers and staff of both banks. The transaction generates immediate value for our shareholders. For Standard Chartered, it creates the leading international bank in the Middle East and South Asia and it will benefit from the growth and synergy the integrated platform will bring."

Standard Chartered has 57 branches in nine countries in the region. Operating profit before provisions of US$ 130 million was generated for the year ending December 31, 1999. Grindlays has extensive coverage across the region where it offers a wide range of banking services to nearly one million customers through 116 branches in 13 countries. It focuses on providing trade finance and cash management to major local and multinational companies. For the year ending September 30, 1999, Grindlays, together with the private banking business being acquired, posted after tax profit of US$ 89 million.

Standard Chartered Plc expects to complete the integration of ANZ Banking Group's Grindlays business in the third quarter, subject to regulatory approvals. While no decisions have as yet been taken on the new branding or on consolidating the combined operations, these would also be completed within this time frame,

Bankers and analysts view Standard Chartered's acquisition of ANZ Group's Grindlays business in the Middle East and South Asia as positive, while putting pressure on local banks to consider mergers. It is a good move, with the merged entity being in a better position to offer more competitive products and services, thus helping improve standards throughout the banking sector. It is also an indication that this region too is heading towards mergers.

It is a positive move and sets the course for more consolidations and acquisitions. Other banks should also consider mergers, where appropriate. The merged entity, is in a position to threaten both the local and foreign commercial banks for leadership position thus putting pressure on all of them.