Standard Chartered in talks on Chinese bank stakes

LONDON - Britain's Standard Chartered Plc is in talks with "one or two" Chinese banks and hopes to buy a stake in one this year or in the first half of 2006, the Asia-focused bank's chief executive said on Tuesday.

"We have been in discussions with a number of people for some time," Standard Chartered CEO Mervyn Davies told Reuters on the sidelines of a banking conference.

"Timing depends on getting the right bank at the right time at the right price ... We are hopeful we will do it this year or in the first half of next year."

Davies said the London-based bank was talking to "one or two" potential targets to get the right deal, though he declined to say which ones. The stake would be on top of a 19.99 per cent share of start-up national bank Bohai that Standard Chartered agreed to buy in November.

Standard Chartered opened its first Chinese branch in Shanghai in 1858. The bank is vying with rivals such as HSBC to expand in mainland China as the world's most populous country prepares to open its US$1.5 trillion ($2.14 trillion) retail savings pool to foreign competition late next year under World Trade Organisation obligations.

Chinese banks are allowed to sell a quarter of their shares to foreign partners, and a single foreign bank can buy up to 20 per cent of any one Chinese lender.

The country's top bank regulator said last week that eight domestic lenders were in talks with potential foreign investors to add to the 10 that had already sold stakes.

Davies said Standard Chartered has a "three-pronged" strategy in China comprising expanding its own business, building Bohai and buying a stake in an established lender.

He also said Standard Chartered's business in its biggest market of Hong Kong, where it makes about a quarter of its profit, would benefit from its closer economic ties with mainland China. The bank's Hong Kong consumer banking revenue was unchanged last year amid pricing pressure.

"We are bullish in Hong Kong because it is an entry port, a financing centre for Chinese companies, a logistics centre and a tourist centre for China," Davies said."The integration of Hong Kong into the Pearl River Delta is one of the most fundamental changes in Asia."

Davies was talking on the sidelines of Morgan Stanley's European banking conference.

- REUTERS