and JOHN EISENHAMMER
Standard Chartered Bank, the UK-based bank with strong Asian business, is believed to be considering an informal approach from NatWest Group that could lead to merger discussions.
It follows talks between NatWest chairman Lord Alexander and Patrick Gillam, Standard's chairman.
City sources say that an internal bid committee exists at Standard, which takes advice from Schroders and Goldman Sachs. Insiders say the committee has discussed a target pounds 11 a share which would secure the board's unconditional approval for a merger.
Banking analysts, however, have said that shareholders in Standard Chartered would seriously look at any bid that was pitched at around pounds 8 a share or more. The current share price is hovering above pounds 6.
Standard Chartered was making no comment yesterday on the speculation.
A bank spokesman would not deny on the record that there had been discussions between his bank's chairman and the chairman of NatWest.
The spokesman pointed out that the first opportunity the bank would get to answer specific questions about its future would probably be later this month when the bank puts out its annual results.
Analysts are expecting profits of pounds 600m-pounds 650m from Standard Chartered, against pounds 510m last year, when the bank reports on 20 February.
Some experts have suggested that NatWest would be unlikely to make a move because it could not absorb a large write-off of goodwill. The book value of Standard at the end of 1995 was pounds 1.7bn, leaving it with goodwill of some pounds 4.6bn at the current share price. NatWest sold out of its American retail operation, Bancorp, recently at just 1.4 times book value.
However, an all-share merger would get round the goodwill write-off problem. A corporate finance insider said a deal could make strategic sense for NatWest, because of the corporate business between Europe and the Far East, and the fact that Standard Chartered offered growth through acquisition to a bank like NatWest based in low-growth, mature markets. Richard Bernstein of Amber Analysis, a financial analysis and ratings service, said that NatWest had built up substantial retained profits of around pounds 4bn. In justifying its pull-back from the US retail market NatWest said it would not be in markets where it only had a small presence. Standard Chartered would offer it a significant foreign presence in the Far East, second to HSBC.
Standard's current share price was down 4p yesterday at 631p. The bid speculation has put the bank on a relatively high rating, although the attraction for NatWest or any other bidder is that its large business in the Far East gives it tremendous potential for future profits growth.