FINANCIAL IMPACTS ON STANDARD CHARTERED BANK

FOR ACQUIRING UNION BANK

TEHSEEN AHMED
1532308004

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 EXECTUIVE SUMMARY

I conduct research under the name and style of “Financial Impacts on Standard Chartered Bank for
Acquiring Union Bank” under the supervision of Sir Raja Rabnawaz.

After collecting and analyzing the Financial Statements of the Standard Chartered Bank (SCB), I want
to reveal that SCB is performing reverse aftermath of acquisition with Union Bank. I further analyzed
to verify through all the financial aspects of the bank but it clearly shows that this acquisition is
occurred just to comply the branches requirement of the State Bank of Pakistan (SBP).

The earnings of the SCB shows negative trend after acquisition. Return on Assets is declining with
50% average yearly. At the time of acquisition ROA was 3.2%, and in the very next year it
become1.23% in 2007 then 0.27% in 2008 and 0.25% in 2009. In the same proportion Return on
Equity as well as Return on Deposits is also declining steadily.

Profit after tax is also contracting because of enhancement in Non Performing Loans (NPLs)
transferred from Union Bank Ltd.

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 TABLE OF CONTENTS

S.NO PARTICULARS PAGE #

01 Title Page 1

02 Executive Summary 2

03 Introduction 3

04 Hystory 3

Financial Analysis

05 Profitability Analysis 6

06 Earning Analysis 10

07 Debt Management Analysis 12

08 Liquidity Of Bank Analysis 14

09 Solvency Of Bank Analysis 17

10 Conclusion 19

11 Recommendation 20

12 References 21

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 LIST OF TABLES

S.NO PARTICULARS PAGE #

01 Profit After Tax 06

02 Net Interest Income 7

03 Non Performing Loan 7

04 Lending To Financial Institutional 7

05 Net Interest Income 8

06 Assets 8

07 Equity 8

08 Debt 8

09 Advaces 9

10 Investments 9

11 Return On Assets 10

12 Return On Deposits & Return On Equity 11

13 Debt to equity/ Deposit Time Capital/Debt to Assets 13

14 Earning To Assets / Advance Deposits. 15

15 Cost Of Fund Earning 16

16 Equity to assets/ equity to deposit/equity to earn. 18

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 INTRODUCTION
Standard Chartered Bank is a British bank headquartered in London with operations in more than
seventy countries. It operates a network of over 1,700 branches and outlets (including subsidiaries,
associates and joint ventures) and employs 73,000 people.

Despite its British base, it has few customers in the United Kingdom and 90% of its profits come from
Asia, Africa, and the Middle East. Because the bank's history is entwined with the development of the
British Empire, its operations lie predominantly in former British colonies, though over the past two
decades it has expanded into countries that have historically had little British influence. It aims to
provide a safe regulatory bridge between these developing economies.

It now focuses on consumer, corporate, and institutional banking, and on the provision of treasury
services—areas in which the Group had particular strength and expertise.

Standard Chartered is listed on the London Stock Exchange and the Hong Kong Stock Exchange and is
a constituent of the FTSE 100 Index. Its largest shareholder is Temasek Holdings..

History
The early years

The name Standard Chartered comes from the two original banks from which it was founded and
which merged in 1969 — The Chartered Bank of India, Australia and China, and The Standard Bank
of British South Africa.

The Chartered Bank was founded by Scotsman James Wilson following the grant of a Royal Charter
by Queen Victoria in 1853, while The Standard Bank was founded in the Cape Province of South
Africa in 1862 by another Scotsman John Paterson. Both companies were keen to capitalise on the
huge expansion of trade and to earn the handsome profits to be made from financing the movement of
goods from Europe to the East and to Africa.

In those early years, both banks prospered. Standard Chartered Bank has a major branch in Kolkata.
Chartered opened its first branches in Bombay, Kolkata and Shanghai in 1858, followed by Hong
Kong and Singapore in 1859. With the opening of the Suez Canal in 1869 and the extension of the
telegraph to China in 1871, Chartered was well placed to expand and develop its business.

In South Africa, Standard, having established a considerable number of branches, was prominent in
financing the development of the diamond fields of Kimberley from 1867 and later extended its
network further north to the new town of Johannesburg when gold was discovered there in 1885. Half
the output of the second largest gold field in the world passed through The Standard Bank on its way to
London.

Both banks – at that time still quite separate companies – survived the First World War and the
Depression, but were directly affected by the wider conflict of the Second World War in terms of loss
of business and closure of branches. There were also longer term effects for both banks as countries in
Asia and Africa gained their independence in the ‘50s and ‘60s.

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Each had acquired other small banks along the way and spread their networks further. In 1969, the
banks decided to merge, and to counterbalance their existing network by expanding in Europe and the
United States, while continuing their expansion in their traditional markets in Asia and Africa.

In 1986 Lloyds Bank of the United Kingdom made a hostile takeover bid for the Group.. The bid was
defeated however it spurred Standard Chartered into a period of change, including a series of
divestments notably in the United States and South Africa.

Recent alliances and developments

In 2000, Standard Chartered acquired Grindlays Bank from ANZ Bank, increasing its presence in
private banking and further expanding its operations in India and Pakistan.[6] Standard Chartered
retained Grindlays' private banking operations in London and Luxembourg and the subsidiary in
Jersey, all of which it integrated into its own private bank. This now serves high net worth customers
in Hong Kong, Dubai, and Johannesburg under the name Standard Chartered Grindlays Offshore
Financial Services. In India, Standard Chartered integrated most of Grindlays' operations, making
Standard Chartered the largest foreign bank in the country.

On 15 April 2005, the bank acquired Korea First Bank, beating HSBC in the bid. Since then the bank
has rebranded the branches as SC First Bank.

Standard Chartered completed the integration of its Bangkok branch and Standard Chartered
Nakornthon Bank in October, renaming the new entity Standard Chartered Bank (Thailand). Standard
Chartered also formed strategic alliances with Fleming Family & Partners to expand private wealth
management in Asia and the Middle East, and acquired stakes in ACB Vietnam, Travelex, American
Express Bank in Bangladesh and Bohai Bank in China.

On 9 August 2006 Standard Chartered announced that it had acquired an 81% shareholding in the
Union Bank of Pakistan in a deal ultimately worth $511 million.[9] This deal represented the first
acquisition by a foreign firm of a Pakistani bank and the merged bank, Standard Chartered Bank
(Pakistan), is now Pakistan's sixth largest bank.

On 22 October, 2006 Standard Chartered announced that it had received tenders for more than 51 per
cent of the issued share capital of Hsinchu International Bank (“Hsinchu”), established in 1948 in
Hsinchu province in Taiwan.[10] Standard Chartered, which had first entered Taiwan in 1985, acquired
majority ownership of the bank, Taiwan’s seventh largest private sector bank by loans and deposits as
at 30 June, 2006. Standard Chartered merged its existing three branches with Hsinchu's 83, and then
delisted Hsinchu International Bank, changing the bank's name to Standard Chartered Bank (Taiwan)
Limited). Prior to the merger, Hsinchu had suffered extensive losses on defaulted credit card debt.

In 2007, Standard Chartered opened its Private Banking global headquarters in Singapore.

On 23 August, 2007 Standard Chartered entered into an agreement to buy a 49 percent of an Indian
brokerage firm (UTI Securities) for $36 million in cash from Securities Trading Corporation of India
Ltd., with the option to raise its stake to 75 percent in 2008 and, if both partners agree, to 100 percent
by 2010.[12] UTI Securities offers broking, wealth management and investment banking services across
60 Indian cities.

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On 29 February 2008, Standard Chartered PLC announced it has received all the required approvals
leading to the completion of its acquisition of American Express Bank Ltd (AEB) from the American
Express Company (AXP). The total cash consideration for the acquisition is US$823 million.

On 12 September 2009, The Times newspaper in the United Kingdom reported that Standard
Chartered had signed a record equaling £20million a season sponsorship deal with Liverpool FC to
commence at the start of the 2010/2011 English Premier League season and last for four years, in a
deal equally the record amount set by Manchester United's sponsorship deal with insurance giant A on.
Liverpool football club announced on the club's official website on 14 September 2009 that Standard
Chartered bank will be the new shirt sponsor starting from 2010 to 2014.

On 27 November 2009, Dow Jones Financial News reported the city of Dubai will restructure its
largest corporate entity. Amongst international banks, Standard Chartered has one of the largest loan
portfolios in the Dubai market and the UAE as a whole, estimated to be $7.77bn in total. This amounts
to 4.2% of Standard Chartered's total loans outstanding. Other impacted banks included HSBC,
Barclays, and RBS. However, Standard Chartered said that any impairment arising from this exposure
would not be material.

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 PROFATIBALITY

Aftermath of acquisition with Union bank, It is observed that Profit of Standard Chartered Bank (SCB)
is suffering negatively.

Graphical Representation

Profit after Tax

It is observed that Profit after tax of SCB was growing with average rate of 25% before the acquisition
but subsequently, it is declining steadily with huge percentages.

YEARS 2005 2006 2007 2008 2009

Profit After Tax 4507 5709 2767 630 669

Declining in Profitability is consequences of many factors.

Such as:

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Net Interest Income
SCB earned interest income of Rs.5276/ in 2005 with excellent proportionate but after acquisition in
2006 SCB earned 10336 and 16192 till 2007.

After Pervaiz Musharraf Regime, economy of Pakistan survived badly (High Inflation, High interest
rates, unemployment, poverty, war against terrorism etc) causing which, borrower failed to pay off
their loans and Ultimately, Interest income contracted to Rs.1419/- in 2008.

YEARS 2005 2006 2007 2008 2009

Net Interest income 5276 10336 16192 1419 16284

Non Performing Loans (NPL)

Impact of recession as well as change in sovereign of the country made borrower default and
consequently enhancement in NPLs amount occurred volatility, Simultaneously, Interest income of the
industry suffered.

YEARS 2005 2006 2007 2008 2009

NPLs 8421 10493 1534 21389 21389

Lending to Financial Institutions

SCB was not providing lending services to Financial Institutions before acquisition. But while
acquiring union SCB had to provide Financial Institutional Lending and enhances financing to
Financial Institutional accordingly.

While, Lending to Financial Institutions is safest and secured operation of the commercial than other
individuals.

YEARS 2005 2006 2007 2008 2009

Lending to Financial Institutions 0 3873 15226 31467 20568

Non Interest Income

Non Interest income is usually collected in account of fee and services provided by the bank.

It is unbelievable that after the acquisition of SCB with the Union bank only non interest income of the
SCB is increasing with a positive trend. It increase with the amount Rs.4433/- during five years and it
is a positive sign of SCB for growing its business but also have many considerable things for
increasing business.

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 YEARS 2005 2006 2007 2008 2009

Non Interest Income 2450 3687 6147 6566 6883

Assets

In result of acquiring union bank, SCB assets become doubled and the earning is declining as we
discussed above. Consequently, Return On Assets declining steadily.

YEARS 2005 2006 2007 2008 2009

Total Assets 111688 246318 255545 264617 312874

Equity

The Equity means a stock or any other security representing an ownership interest. Or
In balance sheet, the amount of the funds contributed by the owners (i.e. stockholders) plus the
retained earnings (or losses).

The Equity of SCB is higher after acquisition with Union bank, the reason of the high equity is to
acquire Union Bank shares as well as earning on lending to financial institutions.

YEARS 2005 2006 2007 2008 2009

Total Equity 8406 40230 40366 42757 47746

Debt

Debt shows the borrowed money by one party to another party, borrowing party take permission for
borrow money from borrower under the condition that it is to be paid back at a later date, usually with
interest.

The Debt of SCB indicates the greater proportion of the debt after the acquisition; the leverage of the
bank shows the risk increases year by year and bank faces the greater debt load, the debt ratio helps to
measure the financial health of the bank.

YEARS 2005 2006 2007 2008 2009

Total Debt 103262 206088 212479 221860 265128

Advances
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The Advances enhanced 3 times in 2006 because of acquiring Union Bank, while further next years it
is declining because of tight monitory policy.

YEARS 2005 2006 2007 2008 2009

Advances 50215 129004 119537 125601 124447

Investments

Banks invest money in shape of financing to individuals and industries against interest, in indigenous
and international stock markets and government treasuries. The SCB investment is increases gradually
during the three years after acquisition with the union bank, because both banks investment joint
together and shows higher investments but in the year 2008 it decline from Rs. 40696/- to Rs.29587
but the very next year it surged to Rs. 54198/-

YEARS 2005 2006 2007 2008 2009

Investments 25359 34629 40696 29587 83785

EARNING RATIOS

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Earnings Ratio shows the earning and returns on the Assets, Deposits and Equities of the bank. The
SCB earnings ratios show its return after the acquisition with the union bank. The SCB has a very
worse condition about returns during the five year after merger. The earning position of the bank is
going down year by year and it shows bank do not get as much return as before.

Graphical Presentation

There are following Ratios shows earning of SCB after acquisition;

Return on Assets

Return on Assets percentage shows the negative return during the five years, the return on Assets is
steadily low between 2005 and 2006. This negative figure indicates that performance on Union
Bank assets is not sufficient.

YEARS 2005 2006 2007 2008 2009

Return on Assets (%) 3.9 3.2 1.23 0.27 0.25

Return on Deposits

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Return on deposit percentage is straight decrease after acquisition, the graph shows small decline in the
year 2006 but it goes further down in the year 2007, 2008 and 2009. In the year 2005 the Deposit on
return percentage is 5.39% but during the five years it goes down to 0.32% in the year 2009. The basic
reason is enhancement in unnecessary Union Banks deposits and declining in investment market as
well.

YEARS 2005 2006 2007 2008 2009

Return on Deposits (%) 5.39 3.64 1.56 0.36 0.32

Return on Equity

Return on equity measures the rate of return on the ownership interest of the common stock. It
measures the efficiency at generating profits from every unit of shareholders' equity. ROE shows how
well a business uses investment funds to generate earnings growth.

The Return of Equity of SCB shows the smaller return after merger with union bank and it decline with
the passage of time the reason is that return on the assets and deposits is not as higher as before merger
so the graph shows the decline stage of return on equity. The return on equity of SCB in the year 2005
was 53% (percent) but after acquisition it goes down with the huge percentage i.e. 30% (percent) in the
year 2006, and the next year in 2007 the return on equity down with 17.79% (percent) and in year 2007
and 2008 the return on its lowest position i.e. 3.75% (percent) and 3.49% (percent).

YEARS 2005 2006 2007 2008 2009

Return on Equity (%) 53 30 17.79 3.75 3.49

DEBT MANAGEMENT RATIO

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Debt management ratios are use to measure the financial debt or leverage of the business. It indicates
the riskiness of the business position. Debt Management ratios help to evaluate long-term solvency,
measuring the extent to which the business is using long-term debt. Debt Management Ratios are use
to attempt for measure the business use of Financial Leverage and ability to avoid financial distress in
the long run. The stock holders are very interested and keeping eye on in debt management ratios
because the debt or financial leverage can improve return to stock holders in good condition of the
business but increase their losses in bad condition of the business.

In the Bank the debts use to indicate the possibility of financial distress and bankruptcy. These ratios
are also known as Long-Term Solvency Ratios.

Graphical Representation

Debt to equity
Debt to equity ratio is the relationship between long-term funds provided by creditors and funds
provided by owners. The debt to equity ratio indicates how much of a business financing is provided
through debt as compared to equity. A debt-to-equity ratio is calculated by dividing long-term debt by
owners' equity.

The Debt to equity ratio of SCB is higher at the time of acquisition in the year 2005 i.e. 12.28 but
gradually it decreases in 2006 and 2007 which indicates conservative financing and low risk, results in
fewer possibilities of large losses or large gains in earnings a small addition occurs in the year of 2008
and in the year 2009 the debt to equity ratio is 5.55.

YEARS 2005 2006 2007 2008 2009

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 Debt to equity 12.28 5.12 4.93 5.19 5.55

Deposit times capital

A time deposit capital is a capital of the bank by collecting to the customer who wants to save their
money at the particular time period in the bank. The banks deposit their money at the fix period and
give interest on the deposit. The banks lend this capital by giving loans to other business and charge
interest on the loans and earn profit. Different banks have different percentage of interest on time
deposit capital.

A time deposit capital SCB is 9.95% (percent) in 2005 at the time of acquisition with Union Bank and
suddenly its 3.9% (percent) goes down in the year 2006 and after that it slowly improve with the small
percentage.

YEARS 2005 2006 2007 2008 2009

Deposit times capital 9.95 3.9 4.11 4.08 4.33

Debt to asset

The debt to asset ratio measures the business overall financial health. It is determined by dividing the
total worth of the assets by the total debt. This ratio help to find the how many assets are financed on
debt. If debt is higher this means that the business has too much risky.

Debt to assets ratio of SCB is 0.92 in the year 2005 at time of acquisition it slowly decrease after
acquisition in the year 2006 and 2007 but it goes its lowest position in the year 2008 i.e. 0.54 but it
goes back its same position in the year 2009 that was in the year 2007.

YEARS 2005 2006 2007 2008 2009

Debt to asset 0.92 0.84 0.83 0.54 0.83

LIQUIDITY RATIO

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Liquidity ratio, expresses a company's ability to repay short-term creditors out of its total cash. It
shows the number of times short-term liabilities are covered by cash. If the value is greater than 1.00, it
means fully covered.

Liquidity ratios attempt to measure a business ability to pay off its short-term debt obligations. This is
done by comparing a business most liquid assets (or, those that can be easily converted to cash), its
short-term liabilities.

In general, the greater the coverage of liquid assets to short-term liabilities the better as it is a clear
signal that a company can pay its debts that are coming due in the near future and still fund its ongoing
operations. On the other hand, a company with a low coverage rate means negative sign for investors
as it may be the business will have difficulty meeting running its operations, as well as meeting its
obligations.

Graphical Representation

Earning assets to assets

Earning assets means money that produce from the assets for a business without any work needing to
be done. Earning assets include such things as stocks, bonds, certificates of deposit, and generally
anything that earns interest or dividends.

We can also say that any item of economic value owned by an individual or corporation, especially
that which could be converted to cash. Examples are cash, securities, accounts receivable, inventory,
office equipment, real estate, a car, and other property etc.
Earning assets to assets of the SCB increased with the normal percentage after acquisition. At time of
acquisition after 2005 there was no earning of SCB on assets to assets but the next year in 2006 it
percentage is 68% and another next year it increase 0.66% that was the positive sign of SCB after
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acquisition and in the years 2008 and 2009 the increase percentage was 70.54% (percent) and 37.13%
(percent) respectively.

YEARS 2005 2006 2007 2008 2009

Earning assets to assets 0 68% 68.66% 70.54% 73.13%

Advance to deposit
An advance to deposit is the amount of money required to secure a thing, facility or service prior to the
event, usually an identified percentage of the total cost. And also the Money paid, usually by check or
credit card before taking any service. The amount is generally given for specific period of time. The
purpose of the advance deposit is to guarantee a reservation. The full amount is applied after
completing the task.

The advance to deposit of SCB was zero at the time of merger with the Union Bank. The next year in
2006 advance on deposit percentage was 82.23% but during five years in the advance to deposit shows
a greater or smaller fluctuation in the percentage, in the year 2007 the percentage was decrease 14.76%
and it increase in the year 2008 just 4.49% but the next year in 2009 an other decline stage occurs and
percentage was decrease 11.83% which was the greater decline after the year 2007.

YEARS 2005 2006 2007 2008 2009

Advance to deposit 0 82.23% 67.47% 71.96% 60.13%

Yield on earning assets

Yield on earning assets is one measure of a financial industry's solvency used by banking regulators. It
looks at total interest, dividend and fee income earned on loans and investments as a percentage of
average earning assets. The earning yield, in investment market related terminology is the percentage
of pure earnings compared to what has been invested.

There was no earning yield on assets at the time of acquisition of SCB with Union Bank in the year
2005. In the next year in 2006 the yield on earning assets percentage is 8.70% and it increase in the
year 2007 with 4.14% (percent) a very small decline occurs in the year 2008 i.e. 0.35% but in the year
2009 the percentage decrease with 0.84% (percent) this was the bit greater than the year 2008
percentage. Over the entire yield on earning assets was going up and down stages during the five years.

YEARS 2005 2006 2007 2008 2009

Yield on earning assets 0 8.70% 12.84% 12.49% 11.65%

Cost of funding earning assets

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Total interest expense paid on deposits and other borrowed money as a percentage of average earning
assets.

Same as above liquidity ratios the cost of fund earning assets was zero of the SCB in the year 2005. In
the year 2006 the percentage was 2.25% and gradually improvement occurs during five year after
acquisition with the Union Bank. And it will increase in the years 2006 to 2007 with the percentage
2.25% to 4.53%.

YEARS 2005 2006 2007 2008 2009

Cost of funding earning assets 0 2.52% 3.61% 3.69% 4.53%

SOLVANCY RATIO

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The Solvency ratio is a way of the investors can measure the business ability to meet its long term
obligations. Obviously if the business is going to go bankrupt no one wants to invest in it.

A measure of a business ability to service debts, expressed as a percentage. A high solvency ratio
indicates a healthy company, while a low ratio indicates the opposite. A low solvency ratio further
indicates likelihood of default. Different industries have different standards as to what qualifies as an
acceptable solvency ratio, but, in general, a ratio of 20% or higher is considered healthy. Potential
lenders may take the solvency ratio into account when considering making further loans.

Graphical Representation

Equity to assets (%)

The equity to assets ratio is one of the standard formulas used to ascertain the overall financial stability
of a business. In essence, the function of the asset/equity ratios is to determine the value of the total
assets of the business, less any portion of the assets that are owned by the shareholders of the firm. The
amounts of assets that are owned by the shareholders is often referred to as owners equity or
shareholder equity.

The Equity to assets ratio shows the relationship of the total assets of the firm to the portion owned by
shareholders, also known as owners’ equity. An equity ratio depends importantly on the industry in
which it operates its size, economic conditions, and other factors. There is no ideal equity to assets
ratio in the banking industry. A relatively high ratio may indicate the business has taken on substantial
debt merely to remain in business. In other words, there is a high return on borrowed capital exceeds
the cost of that capital.

The Equity to Assets Ratio of SCB in the year 2005 is 7.53% (percent) and it increases in the year
2006 and 2007 with the percentage of 16.33% (percent) and 16.85% (percent). A small decrease show
in the year 2008 with the percentage 0.69% and it declining is continue in the year 2009 with the

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percentage of 0.9%. Over all Equity to assets ratio was increase and decrease with the small
percentage during the five years.

YEARS 2005 2006 2007 2008 2009

Equity to assets (%) 7.53 16.33 16.85 16.16 15.26

Equity to deposits (%)

The equity of deposits is increase during the five years after acquisition with the Union Bank the
people did not deposits funds in these years because of the financial turmoil of the bank gives less
interest on the deposits, so the equity were increase year by year. And increase in equity on deposits
was the negative sign for the growing of bank.

YEARS 2005 2006 2007 2008 2009

Equity to deposits (%) 10.049 25.644 24.309 24.495 23.07

Earning assets to deposits (%)

Earning on assets deposits reveal the leverage of the bank over deposits.

It is constantly increasing against the performance of the bank, it might be because of the financial
turmoil.

YEARS 2005 2006 2007 2008 2009

Earning assets to deposits (%) 90.35 106.77 99.04 106.93 110.55

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 CONCLUSION

Considering the facts figures revealed in analysis, every ratio and percentage is showing negative trend
in financial statements. It is very clear that after acquisition with Union Bank, Standard Chartered is
suffering huge losses and it will continue unless it make profitability, comprehensive strategies for
future period. Assets are higher consequently, return on assets and assets performance is showing low.
Furthermore, Opportunity losses are enduring because of tight monitory policy as well as the increase
in non performing loans.

After collecting and analyzing the Financial Statements of the Standard Chartered Bank (SCB), I want
to reveal that SCB is performing reverse aftermath of acquisition with Union Bank. I further analyzed
to verify through all the financial aspects of the bank but it clearly shows that this acquisition is
occurred just to comply the branches requirement of the State Bank of Pakistan (SBP).

It is revealed that this acquisition is made just to overcome the minimum branches requirement.

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 RECOMMENDATION

While analyzing the above mentioned datas, I highly recommend Standard Chartered Bank to sell
unnecessary assets as well as provide financing to Financial Institutions instead of those industrialists
who are already bankrupted in different other banks.

Investment strategy should be change because the position of Stock Market has no scope of return in
future period.

Return on government treasuries is very low, that is why it should further invest through financing
financial institutions and individual as well.

Reference

Sale of Union Bank to Standard Published on 5/17/2006

Chartered Bank in Process
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KARACHI (May 17 2006): The Standard
Chartered Bank (SCB) has initialled an
agreement with a Saudi combine to acquire 66
percent of its shares in the Pakistani listed
Union Bank Limited for 513.76 million dollars.
The, deal upon conclusion, will be the biggest
yet purchase in Pakistan's banking history. The
Aga Khan Fund was the first to purchase 51
percent stake in Habib Bank for 400.95 million
dollars.
SCB is the biggest foreign owned banking
entity having 45 branches in 10 Pakistani cities.
The acquisition of 338 million shares of Union
Bank at 1.52 dollars per share will enable SCB
to extend its Pakistan network to 24 cities. The
Union Bank has 65 branches in Pakistan and
two branches overseas.
After intimation for the intended sale is cleared
by the State Bank of Pakistan, a team from
SCB will commence due diligence exercise at
Union Bank. Upon completion of the exercise,
the sale-purchase agreement will be signed
between the two parties.
UNION BANK: Former Prime Minister
Nawaz Sharif's government had granted
banking licence to a Lahore businessman,
Nasim Saigol, along with nine licences to other
private sector groups to re-enter banking in
1989. Saigol Family had a major stake in
United Bank Limited which was nationalised
by Zulfiqar Ali Bhutto's PPP regime on January
1 1974.
In its first inspection of Bank of Punjab - as a
scheduled bank - SBP inspectors detected a
loan against the sponsors shares of Union
Bank. Under SBP rules pledging of sponsor's
shares in banks to obtain loans was disallowed,
and SBP ordered the Saigol family to sell its
managing stakes in Union Bank.
Dr Abdullah Basudaan, of Saudi Arabia,
having investment in Pakistan in the chemical
field (Nimer Chemicals) bought the 51 percent
sponsor's stake for 12 million dollars and
lodged the same in SBP in 1999. The balance
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sheet of Union Bank was 233 million dollars
(Rs 14 billion) at the time.
In 2000 Pakistan's leading consumer banker,
Shaukat Tarin, became the Chairman of the
Bank. The bank not only acquired the franchise
to market American Express Card (despite
Amexco's presence in Pakistan), but soon went
on a expansion spree. Tarin acquired the three
branches of Bank of America for another 12
million dollars and also later acquired the
branch network of Emirates Bank in Pakistan
for 6 million dollars.
Under Tarin's leadership, Union became a
major force in consumer banking with balance
sheet base of over 2 billion dollars (Rs 122
billion), a growth of 45 percent in one year
with advances and deposits increasing by 26
and 40 percent respectively and annualised
earnings depicting a rise of 35 percent.
However, last year major differences emerged
between the Saudi owners and the management
on expenditure. The expense-to-revenue ratio
was 47 percent in 2005.
Dr Abdullah's group and associates had
increased their stakes from 51 percent to 74
percent to improve their voting strength for
amalgamation of Bank of America's branch
network. Later, the group reduced its stake by
selling 8 percent shares for 12 million dollars.
If this deal goes through, the group, in a span of
six years, would manage to earn 28 times of the
original investment, besides obtaining yearly
dividends.
Standard Chartered Bank: After the freezing
of foreign currency accounts in 1998, a number
of foreign banks operating in the country sold
out their banking licences and networks to
either a local business concern or to another
foreign owned entity.
Societe Generale sold to Kuwaiti Owned Al-
Meezan Bank; Credit Agricole was bought by
NIB; Mashriq Bank was purchased by Crescent
Group; Bank of Ceylon's branch was taken
over by Dawood Group and later sold to Atlas
Investment Bank; and American Express Bank
is being acquired by Jahangir Siddiqui
Investment Bank.
Standard Chartered has a 140 years history in
this part of the world. Originally, the Chartered
Bank, became Standard Chartered after a
merger of two British owned entities with large
network in Asia and Africa in the 1980s. And
later, ANZ Grindlays was also taken over by
SCB making it the largest foreign banking
entity in Pakistan.
Under its new country head, Badar Kazmi
FY2005 has been a historic year, as SCB has
expanded its network from 21 to 45 branches.
Its balance sheet has increased from 1.5 billion
dollars to nearly 2 billion dollars in just over a
year.
The deposit base of the combined SCB/Union
entity would be around Rs 175 billion and
advances will total Rs 119.1 billion. After
shedding expensive deposits in Union Bank
amounting to Rs 9 billion and merging
overlapping branches, the new entity should be
able to drastically reduce Union's
administrative expense, now amounting to Rs
3.2 billion, to Rs 1.5 to Rs 2.0 billion, making
SCB in Pakistan an even more profitable entity.
Once the merger goes through after due
diligence is completed, SCB will have to
corporatise its operations in Pakistan as Union
Bank is a locally listed entity.
In FY2000 Pakistani authorities had invited
leading OECD banks to come forward and bid
in its privatisation process but there was no
response.
The acquisition by SCB is likely to act as a
catalyst for further banking acquisitions and
renewed interest in Pakistan by reputable
international banks. Second largest foreign
entity (as per balance sheet), Citigroup is also
expected to increase its branch network as well.
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Negotiations for over six weeks have been
under way between the representatives of Dr
Abdullah Basudaan and Standard Chartered
group in London. Earlier, Singapore's Tamasek
Group, having stakes in NIB, had also made a
bid to acquire Union's branch network after
being outbid in the sale of ABL to the local
Ibrahim Fibres Group. The stakes of Standard
Chartered in Pakistan after the Union Bank
acquisition will be larger than SCB's present
stake in India, and is expected to make the
Pakistani franchise an important contributor to
SCB's bottom line.
Courtesy of Business Recorder
Standard Chartered acquires
Union Bank
By Our Staff Reporter
KARACHI, Sept 5: Standard Chartered PLC
announced on Tuesday that its subsidiary
company, Standard Chartered Bank (Pakistan)
Limited, has completed the acquisition of 95.37
per cent interest in Union Bank Ltd.
The bank said it had paid an amount of $487
million for the purchase of Union Bank.
Pursuant to the acquisition, Standard Chartered
Bank will submit a scheme of amalgamation to
the State Bank of Pakistan. On approval, Union
Bank and Standard Chartered Bank would
amalgamate into Standard Chartered Bank
(Pakistan) Ltd, said a press release issued by
the bank.
The release said Union Bank provided Standard
Chartered with a significant opportunity for
growth in both consumer and wholesale
banking through product innovation, wider
distribution reach and leveraging Standard
Chartered’s international network.
”Our overriding priority will be to ensure that
we maintain the highest standards of service
for our customers. For customers of both
banks, it will be business as usual until further
notice,” said the release.
Badar Kazmi, chief executive officer, Standard
Chartered Pakistan, said in a statement:
"I am delighted with the completion of the
acquisition of Union Bank Limited. The merger
with Union Bank demonstrates Standard
Chartered’s commitment to Pakistan and
presents tremendous opportunities. This
acquisition is transformational for Standard
Chartered in Pakistan. It will be beneficial for
the customers in terms of our ability to provide
value-added sophisticated products and
services that match our customers’ needs.”
He added.
“It will also provide a strong platform for
personal and professional development and
growth to all staff across the bank,"
By Dawn News
Merger of Standard Chartered Bank
and Union Bank
3rd January, 2007
Welcome to the "new" Standard Chartered
Bank! Union Bank and Standard Chartered
Bank have merged to become one bank. Now
your very own bank has 115 branches and a
network of 119 ATMs in 22 Major cities in
Pakistan.
Standard Chartered Bank started operations in
Karachi in 1863. Our over 140 years of
presence in Pakistan, and a historic investment
in Union Bank is proof or our commitment and
confidence in Pakistan and to you, our valued
customer.
What does this "new" Standard Chartered Bank
mean for you?
Page 25 of
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t is business as usual for you, as none of your
existing banking relationships will change.
Please continue using your regular branch for
all your banking needs - as you have been
doing in the past. Your account numbers,
cheque book, ATM debit card, credit cards,
loans etc, are all valid and can be used just as
before. We will inform you well in advance of
any changes in the future.
You immediately have access to 119 Standard
Chartered ATMs without any additional
charges. In the near future, you will have
access to more innovative products and helpful
services from the "new" Standard Chartered
Bank. We will bring you the latest in financial
services from around the world, so you can
grow your wealth, borrow wisely and
conveniently make your payments.
http://www.brandsynario.com/intl-
news/911_merger-of-standard-chartered-bank-
and-union-bank.aspx
Standard Chartered Bank,
Pakistan. Complaints - Bad
Banking / Incompetent Staff
Standard Chartered Bank, Pakistan.
27 May, 2009 By Asif Ali
Bad banking / Incompetent Staff
I lost my HSMP (Highly Skilled Migrant
Program) Visa to UK for their incometency
during my bank statement verification prcedure
from Brithsh High Comission last year.
Instead of being apologetic; they have started
harassing through their legal department.
I have filed a case against SCB for their
incompetency and ruining my career including
ban to travel UK/EU for next 10 years under
immigration laws of UK for submitting a non-
genuine document (370(A))
This document (bank statment) was legally
obtained from one of the SCB branch duly
verified and stamped by the bank staff.
The account for which the statment was
obtained; was officially opend by our company
and it serves as my salary account.
This not all, sending billing of clared and
cancelled credit cards yet another issue.
Since all my statment and all other
documention is absolutely true and genuine; I
am hopeful that I'll be provided justice in the
court of law.
SCB indirectly harrasing for lengthy trial as per
Pkistani court system norms. But I shall never
deter and fight for justice legally and morally.
Asif Ali
http://www.boltaconsumer.com/complaints/sta
ndard-chartered-bank-pakistan-bad-banking-
incompetent-staff
STANDARD CHARTERED
ACQUISITION OF CONTROLLING
SHAREHOLDING OF UNION BANK
FOR IMMEDIATE RELEASE
London, 09 August 2006 - Standard Chartered
PLC (“Standard Chartered” or the
“Bank”) announces that its subsidiary
company, Standard Chartered Bank (Pakistan)
Limited (“SCBP”), has entered into agreements
to acquire an 95.37 per cent interest
in Union Bank Limited (“Union Bank”) for a
cash consideration of US$413 million (the
“Acquisition”). The Acquisition is unconditional
but before it can be completed, SCBP
is obliged, pursuant to Pakistan law, to make a
mandatory public offer (the “Tender
Offer”) for the remaining shares of Union Bank.
The Tender Offer is expected to
commence on or about 12 August 2006 and is
expected to close on or about 1
Page 26 of
26
September 2006 (“Closing”). The Acquisition is
expected to complete shortly after
Closing.
KEY POINTS
__The acquisition of Union Bank will make
Standard Chartered the sixth largest
bank in Pakistan by market share of assets
and will further extend Standard
Chartered’s business in a high growth market.
Standard Chartered currently has
a network of 46 branches in 10 cities. Pakistan
is an integral part of Standard
Chartered’s Middle East and Other South Asia
strategy and the acquisition will
make Pakistan Standard Chartered’s tenth
largest geography by income.
__The Pakistan banking sector has low
penetration rates and a growing profit pool
that has doubled between 2004 and 2005.
Union Bank provides Standard
Chartered with a significant opportunity for
growth in both Consumer and
Wholesale Banking through product innovation
and by leveraging Standard
Chartered’s international network.
__Union Bank is the eighth largest bank in
Pakistan by market share. It serves
approximately 400,000 retail customers
through its extensive network of 65
branches in 22 of Pakistan’s major cities, and
operates a small but growing
Wholesale Banking business.
__Union Bank has demonstrated an impressive
period of growth since its
establishment in 1991, particularly in the retail
and Small and Medium Enterprise
banking market, where it now holds strong
market shares in mortgages, credit
cards, personal and auto loans. Union Bank
benefits from a strong independent
local management team with a wealth of
experience from leading international
banks.
__The combined entity of Standard Chartered
and Union Bank will deliver
economies of scale, a more complete product
set, a stronger operating platform
and a wider distribution network.
__The purchase price is 17.1 times Union
Bank’s reported after tax earnings in
2005 and 5.6 times its reported net asset value
as at 31 March 2006.
-2-
__The acquisition of Union Bank is expected to
be earnings accretive for Standard
Chartered in 2006.
__Standard Chartered will finance the
acquisition and tender offer through internal
resources.
Bryan Sanderson, Chairman of
Standard Chartered, said:
"Pakistan is a strongly growing country that is
integral to Standard Chartered's Middle
East and Other South Asia strategy. The
acquisition of Union Bank will significantly
increase Standard Chartered’s presence in this
important market."
Mervyn Davies, Group Chief
Executive of Standard Chartered,
said:
"Standard Chartered is the leading
international bank in Pakistan and Union Bank
will
materially enhance its market position. Union
Bank has grown well under its strong
management team, and we will drive further
growth by adding Standard Chartered's
products and processes as we have done
successfully in other markets."
-3-
Pakistan and Union Bank
Union Bank represents an opportunity for
Standard Chartered to extend its existing
footprint in Pakistan and obtain a significant
presence in a high growth market.
Pakistan has shown real GDP growth of
between 5.5 per cent and 8.5 per cent since
2003. Standard Chartered forecasts an
average GDP growth in excess of 6 per cent
every year for the next five years. Standard
Chartered estimates the banking sector
profit pool at USD 1,100 million in 2005, having
doubled over the last year. The low
penetration rates that exist in the sector
(loan/GDP ratio of 30 per cent), and the
demographic profile, make Pakistan an integral
part of Standard Chartered’s strategy.
Union Bank is Pakistan’s eighth largest bank
by market share of assets and has total
Page 27 of
26
assets of USD 2 billion. The bank provides
Consumer and Wholesale Banking
products through its nationwide network of 65
branches in 22 cities, and well
developed alternative channels, including call
centres, internet and 37 ATMs.
Union Bank is listed on the Lahore, Karachi
and Islamabad stock exchanges. The
bank has performed strongly, having grown
assets from USD 988 million to USD
2,081 million between 2002 and the first
quarter of 2006. Union Bank has an
extensive customer base with 400,000 retail
and SME banking customers, and a
small but growing wholesale banking business.
Based on audited local GAAP accounts as at
31 December 2005, Union Bank had
__Total assets of USD 2,009 million
__Total advances of USD 1,201 million
__Net assets of USD 91 million
For the 12 months ended 31 December 2005,
Union Bank reported profit before tax
of USD 47 million and profit after tax of USD
30 million. For the equivalent period in
2004, Union Bank reported profit before tax of
USD 25 million and profit after tax of
USD 15 million.
Acquisition Rationale and Benefits
Union Bank has an impressive track record of
growth driven by a strong local
management team. Standard Chartered will
look to further grow Union Bank in ways
that will include:
__In Consumer Banking: Standard Chartered
will introduce its multi-product
sales model across Union Bank's network to
improve productivity. Standard
Chartered will also add Wealth Management,
Investments and segments
such as Bancassurance and Priority Banking
to complement Union Bank's
existing Consumer Banking expertise.
__In Wholesale Banking: Standard Chartered
has a strong Wholesale Banking
business in Pakistan and can add significant
value through a programme of
product introduction and penetration of new
customer segments hitherto
-4-
untapped by Union Bank. This will include Standard Chartered uniquely derives over 90 per
expanding the product portfolio, cent of profits from Asia, Africa and the
for example Derivatives, Foreign Exchange, Middle East. Serving both Consumer and
Transactional Banking, Trade Wholesale Banking customers worldwide, the Bank
combines deep local knowledge with global
Finance and Corporate Finance.
capability to offer a wide range of innovative
The combined entity of Standard Chartered products and services as well as award-winning
and Union Bank will deliver economies of solutions.
scale, a more complete product set, a stronger Trusted across its network for its standard of
operating platform and a wider governance and corporate responsibility,
distribution network. Standard Chartered takes a long term view of the
Approvals, Implementation and consequences of its actions to ensure that
Timetable the Bank builds a sustainable business through
Before the Acquisition can be completed, social inclusion, environmental protection and
SCBP is obliged, pursuant to Pakistan law, good governance.
to make the Tender Offer. The Tender Offer is Standard Chartered is also committed to all its
stakeholders by living its values in its approach
expected to commence on or about
towards managing its people, exceeding
12 August 2006 and is expected to close on or
expectations of its customers, making a difference
about 1 September 2006. The in
Acquisition is expected to complete shortly communities and working with regulators.
after the closing of the Tender Offer. For more information on Standard Chartered,
Further announcements in relation to the please log on to www.standardchartered.com
Acquisition and the Tender Offer will be For further information, please contact:
made as appropriate. Romy Murray, Head of Investor Relations
-5- Tel: (44) 20 7280 7245
Note to editors Romy.C.Murray@uk.standardchartered.com
Standard Chartered - leading the way in Sean Farrell, Head of Media Relations
Asia, Africa and the Middle East Tel: (44) 20 7280 7163
Standard Chartered PLC is listed on both the Sean.Farrell@uk.standardchartered.com
London Stock Exchange and the Hong Kong
Stock Exchange and is consistently ranked in the http://www.standardchartered.com/media-
top 25 among FTSE-100 companies by centre/press-
market capitalisation. releases/2006/documents/grp_20060809.pdf
Standard Chartered has a history of over 150 years
in banking and is in many of the world’s
fastest-growing markets with an extensive global
network of over 1,200 branches (including
subsidiaries, associates and joint ventures) in over
50 countries in the Asia Pacific Region,
South Asia, the Middle East, Africa, the United
Kingdom and the Americas.
As one of the world’s most international banks,
Standard Chartered employs almost 50,000
people, representing over 90 nationalities,
worldwide. This diversity lies at the heart of the
Bank’s values and supports the Bank’s growth as
the world increasingly becomes one market.
With strong organic growth supported by strategic
alliances and acquisitions and driven by its
strengths in the balance and diversity of its
business, products, geography and people,
Standard Chartered is well positioned in the
emerging trade corridors of Asia, Africa and the
Middle East.

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