Standard Chartered Agrees to Buy 81% of Pakistan's Union Bank

Standard Chartered Plc, the British lender that makes most of its profit in Asia, agreed to buy an 81 percent stake in Pakistan's Union Bank Ltd. for $413 million in cash to more than double its branches in the country.

The purchase price is 17.1 times Union Bank's reported after tax earnings for 2005, the London-based lender said in a Regulatory News Service statement today. It's also 5.6 times the bank's net asset value as of March 31, it added.

The purchase, the biggest in Pakistan's banking industry, will help Standard Chartered expand in a $118 billion economy that Prime Minister Shaukat Aziz estimates will expand at an annual pace of 8 percent in the next five years. Standard Chartered will also more than double its outlets in the country to 111 as it anticipates a possible peak in growth rates in Asia, Africa and the Middle East.

``Union Bank was probably their choice because it is one of the most aggressive banks in the consumer market,'' said Mohammed Imran, analyst at Jahangir Siddiqui Capital Markets in Karachi.

Union Bank Ltd.'s net income more than doubled in 2005 to 1.7 billion rupees from 830 million rupees the previous year. Total assets increased 50 percent to 117 billion rupees. The bank had deposits of 92 billion rupees at the end of 2005.

Pakistan is ``a market we truly believe in,'' Chief Executive Officer Mervyn Davies, 53, said in an interview yesterday. ``We are doing well there and it's a country we think we can do even better in.''

Saudi investor Abdullah Basodan is chairman of Union Bank and the bank's biggest shareholder with a 49 percent holding, according to the lender's 2005 annual report. His holding is worth about 11.95 billion rupees, based on today's closing price.

Standard Chartered yesterday said first-half net income rose 14 percent to $1.09 billion, and signaled a possible slowdown in Asia. Operating profit in its Middle East and Other South Asia division, which includes Pakistan, rose 14 percent to $243 million.

Davies also said yesterday the company would finance the purchase of Union Bank without raising funds from shareholders.

Standard Chartered bought South Korean SC First Bank in April last year for 3.4 trillion won ($3.5 billion).

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

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