industry for several months, American Express Bank has been finally
sold to Standard Chartered (StanChart) on terms that were
tantamount to a give-way firesale.
StanChart’s global private banking head, Peter Flavel, now in the
middle of a ten-market roll-out of the bank’s new private banking
offer, declared that the acquisition “puts the private bank forward
at least three years in our wealth plans”.
Go deeper with GlobalData
The deal should help StanChart, which a decade ago sold its
original private banking operations to Swiss Bank Corp, now part of
UBS, well on the pace to catch up its big rivals. Within StanChart,
it is now admitted that divestment had been “strategically
flawed”.
The $860 million price paid by StanChart was equal to the net asset
value of Amex Bank at completion plus $300 million. Amex Bank’s
total revenues are about $700 million, with private banking
estimated to be contributing just under 30 percent. The rest comes
from the wholesale bank side, which itself fits with StanChart’s
international correspondent banking and currency clearing
businesses.
So the Amex private bank has effectively been bought for about $260
million, based on 30 percent of that $860 million total paid. After
including the $22.6 billion of Amex assets under management (AuM),
the purchase price is a little over 1 percent of AuM for a private
bank with a significant network. This includes seven booking
centres, 25 offices and 120 relationship managers. Then StanChart
will additionally capture the synergies of systems, infrastructure,
data centres and properties.
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By GlobalData
Amex Bank has been up for sale for several months and a number of
banks have looked over the operation. But it has been overshadowed
by a huge US anti-money laundering investigation, which finally
culminated in a $65 million fine on the bank in August. However,
StanChart appears confident that it is acquiring a largely
problem-free operation. The cards and travel parent American
Express has conducted extensive investigations and clients into the
bank, with the help of outside consultants, and amid considerable
pressure by US regulators to clean up Amex Bank. Examination of the
Latin American private clients business was particularly
tough.
Standard Chartered says its acquisition will propel it well into
the top ten list of Asia’s high net worth wealth league – most
likely in seventh position. At the end of 2006, JPMorgan was ranked
as the seventh-largest wealth manager in Asia, with $27.5 billion
of assets under management (see table).
For StanChart, AuM globally should conservatively increase by about
70 percent to $30 billion after the acquisition. The bank also
picks up valuable trust and fiduciary operations and a wrap
capability, which were scheduled to be rolled out by the bank as it
built up its wealth operations globally.
The future ‘cost avoidance’ is thus significant. In addition, the
Amex back office administration system is the same one that
StanChart is developing, avoiding the normal headache of choosing
one system and then undertaking an always tough client conversion
exercise.
StanChart also adds Amex’s 120 private bankers to its existing 150
client managers, with most of the Amex staff coming in StanChart’s
key Asian and Middle East markets.
StanChart chief executive Peter Sands said the deal “turbo charges”
the private bank effort by doubling its relationship business. He
said the acquisition would make “no significant contribution in
2008” to earnings growth at the private bank, but that it will be
accretive to StanChart’s earnings per share in 2009 and generate a
double-digit return on investment in 2009 before integration
expenses.
Sands said integration should take about two years to complete,
with the majority of integration costs borne in the first
year.
