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Temasek to raise
stake in StanChart past 20%
Danny
Fortson
The Independent
13 Feb
08
http://www.independent.co.uk/news/business/news/temasek...
Temasek
views Standard Chartered's role in printing Hong Kong's banknotes
as an irrelevance, and will increase its stake in the bank to
more than 20 per cent as soon as the shares fall to a point that
it deems attractive.
According to sources close to the
situation, Singapore's sovereign wealth fund is ready to scoop up
more of the bank's shares, which have been very volatile in
recent months as a result of the financial crises that have
struck the banking industry. Standard Chartered is concerned that
if Temasek, which already owns 19 per cent of the company,
breaches the 20 per cent barrier it will be barred from printing
banknotes by a Hong Kong Monetary Authority regulation that
prohibits any bank-note issuer from having links with a foreign
government that give voting rights of 20 per cent or more in the
company.
Standard Chartered is one of Temasek's biggest
bets outside Singapore, and the fund is keen to increase its
stake in the company, which it sees as well placed to capitalise
on the growing financial needs of Asia's burgeoning middle class.
The sovereign wealth fund is understood to be unconcerned that
such a move could end Standard Chartered's note-issuing role. It
views the issuing of banknotes as a colonial anachronism that
contributes negligibly to the bottom line and falls well outside
what should be the company's main focus of expanding its core
banking business in the region.
Before Temasek can
increase its holding beyond 20 per cent, the Financial Services
Authority must be satisfied that it meets two criteria under
change of control regulations: that it is "fit and proper",
and that its increased interest will not adversely affect
customers. Temasek has not yet applied for the approval, which
can take up to three months but is often resolved in days or
weeks.
A Standard Chartered spokes-man said: "Temasek
is a responsible shareholder and is fully aware of the broader
regulatory consequences of its holdings across our
markets."
StanChart
leaves investors out in the cold
Philip
Bowring
Asian Sentinel
12 February
08
http://www.asiasentinel.com/index.phpoption=com_content&task...
Investors
are left to fend for themselves in the latest chapter of the
global banking mess
Asian
investors who thought they could trust Standard Chartered, the
venerable old British bank that has been around Asia for a
century and a half, are whistling in the wind for their money.
The group, now 19 percent owned by the Singapore
government through Temasek Holdings, is walking away from its
US$7.2 billion structured investment vehicle (SIV), appropriately
named Whistlejacket Capital. This pile of assets was sold in the
form of notes to big-name, deep-pocket clients in Asia and the
Middle East. But now that Whistlejacket's assets have fallen
sharply in value, today put at around half the level of six
months ago, the bank no longer wants full responsibility for it.
That is perfectly legal. StanChart, like other major
banks, enticed clients to acquire various debt assets that it
claimed were good investments but were not on the bank's own
balance sheet. When trouble first hit the market in
collateralized debt obligations (CDOs) and similar fancy
instruments in the wake of the US sub-prime crisis, StanChart
offered to provide liquidity to Whistlejacket — but only so
long as its assets were worth 95 percent of their book value.
That is no longer the case, so StanChart has walked away
and Whistlejacket is going into receivership. Others could have
done the same, but to protect their reputations, rivals such as
HSBC and Citicorp volunteered to bring the SIVs onto their own
balance sheets, requiring them to provide for some US$40 billion
in losses and, in Citi's case, forcing it to go cap in hand to
sovereign wealth funds for more capital.
Some investors
in Whistlejacket who held short term notes were able to get out,
helped by the liquidity facility. But the rest are locked in and
may well, according to London sources, lose half or more of their
money. That would come as a shock to investors who thought they
were buying AA-rated paper. But such a rating was possible
through the financial alchemy (approved by ratings agencies) that
enabled asset-backed securities — when suitably re-packaged
— to acquire superior ratings while delivering higher
yields.
Whistlejacket investors will have to wait and see
how the assets look to the receiver, and what assistance
StanChart will give in providing some ways of disposing of its
assets at other than fire-sale prices.
Unwillingness to
put Whistlejacket onto its books raises questions about the
strength of StanChart's own balance sheet. The bank has long been
a subject of takeover rumors and may now seem a tempting target.
However, with so much financial asset destruction over the past
year and with more to come, cash-rich investors are likely to
hold back till the extent of losses throughout the system is
known. Arab, Singapore and China funds may be regretting the
amounts they have already pumped into ailing western institutions
now that the size of their combined losses is becoming clearer
and many more calls for rescue are likely to be heard in the
coming months.
This episode must leave a sour taste in the
mouth of Temasek, which only recently increased its stake in
Stanchart to 19 percent. It acquired 11.5 percent from the estate
of the late Malaysian banker Khoo Teck Puat in 2006. Khoo had
helped rescue the bank from a takeover in 1986 following
write-offs in Southeast Asia and Hong Kong that forced it to sell
landmark city-center buildings, including its Hong Kong head
office.
Temasek evidently thought it had a good buy,
gradually building on the Khoo stake. But with the latest
problems, StanChart's share price is back to where it was two
years ago. Temasek's stake is now on the threshold where this
level of holding is becoming a quasi-political issue. At 20
percent it would bring into question whether StanChart could
continue to be a note-issuing bank in Hong Kong – a
privilege that is of limited practical value but carries much
prestige.
Temasek may want to use the price fall to go
above 20 percent, on the assumption that the Hong Kong Monetary
Authority would not object. Its stake could rise to 30 percent
before being required, under British rules, to make a full offer.
That looks unlikely given Singapore's new sensitivity to foreign
suspicion of sovereign wealth funds.
Also, while Temasek
probably wants to go above 20 percent, it has splurged so much
cash on troubled banks that it may bide its time to see if more
troubles are in store for StanChart. Nor can it ignore the damage
to StanChart's reputation among those in the Middle East and Asia
who had long trusted it as a stable institution.
Standard
Chartered was formed in 1969 from the merger of Standard Bank of
South Africa, founded in 1863, and the Chartered Bank of India,
Australia and China founded in 1853. The South African operations
were sold during the apartheid era but Stanchart acquired a big
Middle East presence by acquiring Grindlays Bank, another British
colonial enterprise.
Today,
StanChart has globe-spanning operations and is seen as
emerging-market focused. Most of its profit comes from Asia,
notably Hong Kong, India and Korea (through its acquisition of
Korea First Bank in 2005). It is expanding in the Gulf and has
ambitions in China. However it is not the major bank in any
significant market and may have been growing too fast for its own
good. Even without off-balance-sheet vehicles, its asset base
grew 24 percent to $266 billion in 2006. Like so many other
financial institutions over the past five years, it may have
confused rapid growth in size and profits with its own skill,
rather than the era of easy money and buoyant economies.
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