Standard Chartered Bank's Acquisition of American Express Bank (A)

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Case Details:

Case Code : BSTR347
Case Length : 18 Pages
Period : 2007
Pub Date : 2009
Teaching Note :Not Available
Organization : Standard Chartered Bank / American Express Bank
Industry : Banking / Financial Services
Countries : UK, USA

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction Contd...

This was the biggest acquisition made by StanChart since September 2006 when it had acquired Taiwan's Hsinchu International Bank for US$ 1.3 billion. Analysts were of the view that the AEB deal fit in well both strategically and financially with StanChart's operations.

Cubillas Ding, an analyst at Celent⁵, opined, "The deal appears to be defensive against the likes of UBS, Credit Suisse, and City Group Inc., which are focusing their private banking businesses on Asia aggressively." Lehman Brothers⁶ reiterated its ‘overweight' rating for StanChart as its traditional banking and private banking business were expected to benefit from the acquisition.⁷

For American Express, this deal signified divestment from their non-core business and a greater focus on their core businesses - credit card and travel payment. Analysts at Citigroup⁸ opined that with the sale of AEB, American Express could free up its investments, to invest in high return businesses.

Excerpts >>

5] Celent is a Boston, US-based research and consulting firm focuses on the application of information technology in the global financial services industry. It provides research and consultancy services to the clients.
6] Lehman Brothers is a global financial services company, involved in activities like investment banking, investment management, private equity, private banking, equity and fixed income sales, and other activities. In 2006, the company's revenue was at US$ 46.709 billion and profits stood at US$ 4 billion. On September 15, 2008, Lehman Brothers filed for Chapter 11 bankruptcy because of losses incurred due to exposure in subprime assets.
7] "Standard Chartered Acquisition of American Express Bank," www.industrywatch.com, September 18, 2007.
8] Citigroup Inc., US-based financial services company, is the largest company in the world as of March 2007, according to Forbes Global 2000. Citigroup was formed from the merger of Citicorp and Travelers Group in 1998. In 2007, its revenue stood at US$ 81.70 billion and net income was at US$ 3.62 billion.

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