StanChart gets 7 branches via Amex Bank buy

Standard Chartered Plc reached an agreement to acquire US-based American Express Bank (AEB) for about $860 million in cash "" a deal that would give the British banking major seven additional branch licences in India.

"In areas where certain travel-related operations are conducted through AEBL or a subsidiary of AEBL, American Express is in the process of acquiring new licenses and/or transferring the business to a different American Express Company entity to ensure a smooth transition. These countries include Argentina, Austria and India," a spokesperson of American Express said.

AEB, whose New York-based parent company is the third-largest credit card network, is a leading international bank present in 47 countries, including India. The deal, however, will have no impact on American Express Bank formidable presence in the credit card and travel business.

The deal will provide StanChart an opportunity to add capability, scale and momentum in the strategically important financial institutions and private bank businesses. Among other benefits, the acquisition will include valuable branch licences in India and Taiwan subject to regulatory approvals, Stanchart said in a statement.

Standard Chartered is the largest foreign bank in India with 81 branches against American Express Bank's seven branches, as of September 2006.

The branch acquisitions will give Standard Chartered an edge in India as it would have the largest branch network in India. Its competitors, HSBC and Citibank, have 47 and 39 branches, respectively. The branch acquisition is significant considering that the Reserve Bank of India allows foreign banks to set up an average 12 to 14 branches annually.

The asset base of the merged entity in India will be around Rs 62,896.84 crore. AEB's employee strength in India was around 1,773 as on March 31, 2006.

Observers said apart from the seven branches, the acquisition will boost StanChart's presence in the private banking space in India. The bank has been betting big on this business and acquired UTI Securities, the retail broking company, recently.

Standard Chartered, which entered the wealth management space in India in June 2007, plans to launch this service in the top six cities by the end of 2008. The foreign bank's client assets under management is Rs 10,000 crore and it wants to double the strength of relationship managers to 50 by the end of the year.

India has been a key focus market for Standard Chartered, considering that the share of Indian operations in the bank's global profits increased to 12.6 per cent in calendar 2006 from 8.8 per cent in 2005.