StanChart chief to retain ABC stake

Standard Chartered Bank's boss has ruled out cutting its exposure to Agricultural Bank of China, saying the two banks had a good working relationship.

'We are very happy with the partnership. We've become ABC's preferred partner for its clients ... [who] can make use of our international network,' said Peter Sands, Standard Chartered Bank group chief executive. He was commenting at the end of the lock-up period for ABC, one of China's 'big four' state-owned commercial lenders.

ABC has 5.11 billion A-shares whose lock-up period ended on Friday, and 12.295 billion H-shares' whose lock-up period expired on Saturday. The shares can be sold starting today.

Speculation has mounted that foreign stakeholders may plan to sell down cornerstone stakes in mainland banks as the lock-up periods expire. Foreign investors including Bank of America, Goldman Sachs and Royal Bank of Scotland Group have trimmed more than US$22 billion of holdings in Chinese lenders since the start of 2009, according to Bloomberg data.

Limits on most of Bank of America's 10.2 per cent stake in China Construction Bank Corp, worth US$20 billion, will be lifted next month. CCB is the world's second-largest lender by market value.

Separately, Sands played down concerns about the impact of 'ring fencing' requirements being issued by Britain's Independent Commission on Banking (ICB). He said these would have little impact on Standard Chartered, because the bank did not have a retail operation in Britain.

The United Kingdom said in June that British banks would be forced to 'ring-fence' their retail divisions from their investment-banking businesses, maintaining them as separate operations, in an effort to make the sector safer.

By the end of last year, Asia contributed nearly 70 per cent of business for Standard Chartered, while Hong Kong accounted for nearly 20 per cent, the bank said.

Sands said another change in regulation, the British bank levy, would cost Standard Chartered about US$190 million this year.

The British government last year announced a levy on the balance sheets of UK-based banks. The tax will be fully applied this year.

'If you turn that into a net present value ... that in a sense is the biggest hit our shareholders have taken as a result of the [financial] crisis,' Sands said.

'There is a real risk of damage to the UK economy, a weakening of the competitiveness of the UK banks, and an undermining of London's position as a financial centre,' he said of the combination of measures.