10th Feb 2023 12:16
(Alliance News) - First Abu Dhabi Bank PJSC on Friday extinguished Thursday's reports that it was considering a takeover offer for Standard Chartered PLC, bursting the day-long bubble on StanChart shares and causing them to retreat, according to Hargreaves Lansdown.
First Abu Dhabi, otherwise known as FAB, said its stance had not changed since early last month, when it said it ended "very early stages" of evaluating a possible offer for the London-based lender.
StanChart was the top FTSE 100 performing stock on Thursday, closing up 11% following a report from Bloomberg that Abu Dhabi's FAB were pressing ahead with a potential USD35 billion offer.
But shares in StanChart tumbled after FAB's statement dampened investor sentiment, dropping 5.0% to 729.20 pence each on Friday after midday.
"Given that Standard Chartered has such a large footprint in emerging markets with its operations in 59 countries, and is highly active across the Middle East, it's clear why speculation about a First Abu Dhabi Bank takeover reached fever pitch given the opportunities presented," said Hargreaves Lansdown analyst Susannah Streeter.
Streeter noted there would be risks associated with any takeover, namely StanChart having a large exposure to commercial real estate debt in China.
"Although this may be part of the reason why [it] is for now steering clear, it’s also likely to be down to takeover rules," Streeter continued, adding a six-month cooling off period kicked in when FAB declare in January it was stepping away from any offer.
Streeter said there is "clearly is a great deal of speculation that First Abu Dhabi may move again, once the cooling off period ends in July", and that StanChart's share price remains "far above" the level it was before rumours began at the start of the year.
In the last six months, StanChart shares were up 21%.
Meanwhile, Shore Capital on Friday backed StanChart with a 'Buy' rating, setting a price target of 768p, despite the FAB announcement.
Analyst Gary Greenwood said the speculation surrounding StanChart and FAB "feels like a rumour that is not going to go away easily, despite FAB's repeated denials".
Shore Capital views StanChart shares as "fundamentally cheap", citing a standalone fair value of 900p. It added that with speculation FAB "may offer north of GBP29 billion" for the London-based lender, this would imply a takeout valuation over 1,000p.
It forecasted StanChart's 2022 pretax profit to be up 39% to USD4.67 billion from actual USD3.35 billion in 2021. Further, it expects a 17% rise to USD5.48 billion in 2023 from 2022 forecasts, and a further 19% increase to USD6.51 billion in 2024 from 2023 forecasts.
RBC Brewin Dolphin analyst John Moore said StanChart could benefit from, alongside HSBC, the recent recovery in Asia and emerging markets more generally, adding to the headwinds driving performance for both banks.
By Greg Rosenvinge, Alliance News reporter
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