Bested last year by Citigroup in the bidding for KorAm Bank, Standard Chartered was determined not to be outdone again in its effort to break into the South Korean market. The London-based bank last month ponied up $3.3 billion to buy Korea First Bank, the country’s seventh-biggest bank by assets, topping a rival offer from HSBC Holdings.
Peter Sands, director of finance and strategy at Standard Chartered, is sure the bank can make the deal pay off. How? By stepping up the cross-selling of consumer loans and wealth management products to Korea First’s retail customers and using its expertise in trade finance, currency and derivatives trading and bond underwriting to win a bigger share of the local corporate market.
“We’re confident we can build a much higher-return wholesale franchise, because we’ve done it for ourselves,” says Sands, 42, who joined the bank from McKinsey two years ago. “We were virtually nowhere four years ago. Now in most of our markets, we’re No. 1, 2 or 3.”
Investors generally welcomed the deal despite the premium price of 1.9 times net asset value. Standard Chartered helped finance the purchase of Korea First through a £1 billion ($1.9 billion) placement of new shares. “They’re not getting it cheap,” says William Johnston, a banking analyst at Alliance Capital in London. “But if you want to enter one of the largest economies in Asia, you’re not going to get a free ticket.”
The transaction underscores the dramatic turnaround of South Korea’s financial sector since the 1997 Asian crisis -- and guarantees a rich return for Newbridge Capital. In 1999 the San Franciscobased private equity group paid the South Korean government $480 million for a controlling 48.56 percent stake in the bank. The government, which owns the remainder, is selling its holding as part of the deal.
The irony is that the improvement in Asian markets -- and in the performance of Standard Chartered -- could make a takeover target of the bank itself. Within days of the acquisition, reports surfaced that J.P. Morgan Chase was interested in buying the 13 percent stake in Standard Chartered held by the family of Tan Sri Khoo Teck Puat, a Singapore investor who died last year.
