Standard Chartered Plc said on Tuesday it had agreed to buy American Express Bank for around $860 million in cash to boost its private banking and correspondent banking services. It would also give the British banking major additional branch licences in India.
Standard Chartered said it would buy the bank from American Express Co. for its net asset value at the time of completion, plus $300 million. At the end of June, that value stood at $860 million, though American Express said separately it valued the transaction at $1.1 billion.
The deal, which Standard Chartered said it would finance with internal resources and an ongoing debt-funding programme, is expected to create pre-tax cost savings of more than $100 million per year from 2009 onwards, Standard Chartered said.
The bank expects the deal to be accretive to earnings per share in 2009, the first full year of ownership. Standard Chartered CEO Peter Sands said AEB, focused on financial institutions and high net-worth customers, would boost the group?s transaction banking business and provide a step change for its recently launched private bank, accelerating its private banking strategic growth plan by ?about three years?.
Among other benefits, ?The acquisition will include valuable branch licences in India and Taiwan subject to regulatory approvals,? Standard Chartered said. According to the data released by Reserve Bank of India, Standard Chartered is the largest foreign bank in India in terms of branches, with a total of 81 branches, against American Express Bank?s seven branches as of September 2006, out of total 258 branches of 29 foreign banks.