Bidding war looms for Standard Chartered

Standard Chartered, the British bank headed by Mervyn Davies, is being lined up as a bid target by aggressive US banking giants such as JP Morgan, Citigroup, Wells Fargo, Wachovia and Bank of America, according to investment bankers.

Financiers in London and New York say Standard Chartered is being circled because more than two-thirds of its business comes from Asia, with much of the remainder coming from booming markets in the Middle East such as Dubai.

A scramble for business in the Far East is being driven by phenomenal growth in China, India, Thailand and even Vietnam, where HSBC recently boosted its presence. Standard Chartered shares have jumped 6 per cent to 1323p in the past eight weeks amid the bid rumours.

Analysts say a US takeover of Standard Chartered would put it in a prime position to expand in China, where a consortium led by Citigroup is close to securing exclusive rights to buy a controlling stake in Guangdong Development Bank.

'Standard Chartered has a fantastic franchise in Asia, and there would almost certainly be a bidding war if one of the international majors moved in for the kill,' said a banking analyst in London.

Davies has turned round the bank after boardroom squabbles led to the ousting of his predecessor, Rana Talwar, three years ago. Last spring, Davies splashed out £2bn for Korea First Bank despite City scepticism, but KFB has been successfully integrated and is now performing ahead of expectations.

Standard Chartered is also being eyed by British banks Royal Bank of Scotland and Barclays, but observers say the target, valued conservatively at £20bn, could be 'a bit of a mouthful for either'.

Two years ago, the death of the largest shareholder in Standard Chartered raised questions about its future ownership. Singapore tycoon Tan Sri Khoo Teck Puat was among three investors who had acquired a 37 per cent stake in the bank in 1986 to thwart a hostile takeover by British clearer Lloyds. There was speculation that his family would sell, but they have retained a stake of around 7 per cent.

There are mixed views about Standard's prospects over the coming 12 months, with some analysts suggesting that growth in Korea, Indonesia and Thailand could slacken this year.