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Business: Stanchart -- How a British Bank is Becoming More Asian
Plus... a little Assif matchmaking on the side

September 19, 2000
Web posted at 6.30 p.m. Hong Kong time, 6.30 p.m. EDT

Three weeks ago, the day Standard Chartered Bank announced it was buying the retail operation of Chase Manhattan in Hong Kong for $1.3 billion, I called their PR department in London to put in a request for an interview with the Chief Executive Rana Talwar. I left left only my name and cellular phone number, and since it was already Friday evening in Singapore I figured I would follow up the call with an email and possibly a fax request in hopes of getting an intereview the following week. An hour later, as I walked into a crowded Mass Rapid Transit (MRT) station my mobile phone rang. It was Stanchart's gregarious CEO from London: "Assif, good evening this is Rana Talwar from Standard Chartered Bank. How's the weather in Singapore?" Stunned, I could only manage to say that I was getting on the train and that I would call him back within 15 minutes when I got home. Not long after that I was doing a phone interview with him. As a financial journalist who has covered banks for 19 years in Asia, I can tell you that trying to interview senior executives is usually a hassle, requiring numerous faxed requests and a wait that can last for weeks. This was a refreshing change.

But then, this was also Rana Talwar, whom I have known for a decade. He is a no-nonsense guy who pulls few punches and is fairly direct even with combative journalists. Stanchart was once a stodgy old British-owned bank with a big presence in Asia and Africa, part of its colonial legacy. In the past few years, it has been transformed into a dynamic institution with a strong Asian and emerging-markets focus. With India-born Talwar, the former head of Citibank's Asian consumer bank, at the helm since October 1998, Stanchart has been refocusing to establish a strong retail presence in Asia and the Middle East. "We want to be one of the top two or three players in Asia and emerging markets around the world," he told me. "European, American and even large Japanese banks are so inward-looking that we believe we almost have the field to ourselves."

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Stanchart was born of the '70s merger between Chartered Bank, an old British institution with a large presence in Hong Kong, Malaysia and Singapore, and Standard Bank, an old British institution with a big presence in Africa. In the '80s, anti-apartheid protests forced Stanchart to hive off its South African subsidiary, though Stanchart retains operations in other large African economies from Nigeria to Kenya. In the mid-'80s, a ton of bad loans nearly bankrupted Stanchart. It was bailed out by two Asian entrepreneurs -- Hong Kong's late shipping tycoon Sir Y.K. Pao and Malaysian-born, Singapore-resident banker and hotelier Khoo Tech Puat, who each bought a 15% stake in the bank by injecting new capital into it. The family of Sir Y.K. Pao (which owns Hong Kong Wharf Holdings, Worldwide shipping group and Wheelock groups) sold its Stanchart stake. Khoo, who founded Malaysia's top bank Malayan Banking and has for 30 years lived in Singapore where his family owns the famous Goodwood Park Hotel, is now in late 80s and ailing. He has, however, kept his 15% stake and is still Stanchart's biggest single shareholder.

So while Stanchart is technically a British bank, its largest shareholder is a Malaysian living in Singapore, its CEO is an Indian and this year it will derive more than 90% of its earnings from Asia. Moreover, the global headquarters of some its key divisions -- like retail banking, corporate banking and treasury are all based in the Lion City.

When Rana Talwar took over Stanchart two years ago, Asia was in the depths of its economic and currency crises. Stanchart's Asian clients had loaded the bank with several hundred of millions of dollars in bad loans. But Rana says from his first day his eyes were focused on expansion. "It is a huge region of opportunity and not many multinational banks actually take Asia seriously any more. We saw the Asian Crisis as a huge opportunity. We wanted to buy cheaper Asian assets to dramatically expand our base in the region and we have accomplished most of our goals."

Stanchart has been the biggest acquirer of Asian banking assets since 1998. In 1999, it bought Thailand's Nakornthon Bank and the global trade financing business of Swiss financial group, UBS. It also negotiated for Indonesia's Bank Bali, but walked away from the deal after wrangling with local staff and uncovering a scandal that allegedly implicated the then ruling party, Golkar. In April 2000, it paid $1.3 billion to acquire Grindlays Bank from Australia's ANZ Bank. Grindlays is the largest foreign bank in South Asia - with a huge retail presence in India, Pakistan, Sri Lanka, Bangladesh as well as several Middle East states like Bahrain and the UAE. Grindlays was snatched away from under the noses of players like Citibank and HSBC, both of which want to expand their franchise into increasingly prosperous India. Then late last month, Stanchart acquired the retail banking operations of Chase Manhattan in Hong Kong. Chase, which recently bought investment banks Robert Fleming (including its Asian subsidiary Jardine Fleming) and J.P. Morgan, is exiting the retail banking business in Asia. Together with its own huge presence in Hong Kong, the purchase of Chase's operations makes Stanchart the biggest single credit card issuer in the territory, ahead of HSBC, Bank of China group and Citibank. "We are now the No.1 card issuer in Hong Kong, No.1 foreign issuer in the Indian subcontinent and a formidable player in Singapore, Malaysia and increasingly Thailand," says Rana. "There is consolidation going on right at the top of the league in Asia, and we are up there in all the key markets with HSBC and Citibank."

Stanchart won the Hong Kong battle against Singapore's DBS Bank, which has just 1% of the Hong Kong retail market but is desperately trying to expand in the region. Even though it is flush with a few billion in cash, it hasn't been able to buy much. As CEO John Olds told me the other day, DBS isn't so imprudent as to pay the moon for the sake of expansion. There isn't much left to buy in Hong Kong, unless DBS wants to take on the Bank of China Group or HSBC or its subsidiary Hang Seng Bank. None of which is likely. The two other substantial players -- Bank of East (led by David Li) and Dao Heng group (led by Malaysia's Quek Leng Chan) -- aren't for sale at any price right now. DBS also needs a presence in Malaysia. Apart from the omnipresent Citibank and HSBC, the only other big players there are Singapore banks and Stanchart. (Local Malaysian banks are out of bounds for acqusition-minded foreigners.)

Olds told me repeatedly that DBS wants to stay independent for now and that he'd rather gobble up a giant than be eaten for lunch himself. And Stanchart? Its $3-billion shopping spree in the past two years still leaves it vulnerable. But could DBS-Stanchart be a merger made in heaven? No, says Olds. Absolutely out of the question, says Talwar. I put this questions to both men three weeks ago. At today's prices, a merger would create a bank in which Stanchart shareholders would control 55% or 60% of DBS. Singapore Deputy Premier Lee Hsien Loong says the government wouldn't mind a merger which dilutes its 40% stake in DBS to less than half that. There are no talks between the two banks to cooperate or merge. But I would argue that no two banks fit each other as well as these two. Singapore's DBS has the money and the will; it has done well reforming itself into a world-class bank under Olds, but is still just a bit player in the region. Just think what DBS could do with a bit of the boldness of Stanchart's Rana Talwar. Right now Talwar is a dynamic leader running a small boat in a big sea in London. In Singapore he could make huge waves, not just for DBS but for the entire financial services industry.

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