Stanchart concludes purchase of Barclays custody business

Staff Writer | Tuesday November 2, 2010 00:00

In a statement, Stanchart says though undersubscribed by about 24 percent, funds from the rights issue will be used to purchase the business from fellow bank, Barclays Botswana.

Says the statement: 'Standard Chartered announces the results of the Rights Issue in which the company raised approximately P137 million gross of expenses. 75.9 percent (7,808,702 shares) of the Offer Shares were taken up by shareholders and their renounces out of the 10,288,041 Offer Shares that were available for the Right Issue.

'The Offer Shares have been listed on the Botswana Stock Exchange (29th of October 2010). Stanchart will use the funds to acquire Barclays Bank's custody business in Botswana. 'By acquiring the custody business, Stanchart will benefit from expanded product offering, sustainable annuity income from the new business, additional deposit liquidity and more opportunities to further develop banking relationships with regional and international investors.

The custody business is a financial service, usually available to institutional investors only, that includes the management and safekeeping of securities and bonds, the collection of dividends, dealing with tax, valuation of investments, foreign exchange, and the settlement of transactions. Barclays exited the global custody business outside Africa in 1998 and, according to an earlier statement, the sale of the Botswana business will realise value and give it an opportunity to focus on increasing their presence in key magnet segments.

'Our custody business in Africa is attractive and profitable and the sale will realise significant value for Barclays Africa,' said Vinit Chandra, CEO of Barclays Africa.

'We will work closely with Standard Chartered to ensure the transition does not impact our clients and employees and remain fully committed to growing our banking operations in Africa.'

According to Standard Chartered, as at December 2009, the gross value of the asset that is the subject of the transaction was approximately US$3 million and customer assets under custody were approximately US$6.2 billion. The African business forms a key part of Stanchart's build out of international custodian services, alongside existing capability in Asia and the Middle East.

The acquisition is also expected to add direct custody capabilities in eight African markets and indirect capabilities in a further eight markets provided through a network of third party sub-custodians via an operation in Mauritius. Stanchart Botswana's parent company, Stanchart PLC, last month announced that it would also undertake a rights issue in a bid to raise cash to meet recently introduced capitalisation rules.

The bank said it would raise between US$7.91 billion and US$11.08 billion as part of efforts to protect itself from the impact of the new Basel III capital rules. Stanchart will become only the second big bank to respond directly to Basel III rules after German bank Deutsche Bank AG (DB) also announced a rights issue in September.

Stanchart has emerged from the financial crisis the least affected of any UK bank partly due to its focus on emerging markets which have withstood the economic slowdown better.

In early August, Stanchart reported an increase in profit for the first half of the year, as the company's provision for bad loans declined nearly 60 percent year-over-year.