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Standard Chartered Bank is believed to have made a winning bid well in excess of US$1 billion to snatch the consumer-banking business of Chase Manhattan Bank in Hong Kong away from its biggest rival, Singapore-based DBS Bank.

Bound by confidentiality agreements, none of the parties in the transaction would comment yesterday.

Both Peter Wong, Standard Chartered's Hong Kong chief executive, and Paul Marriage, the bank's chief spokesman in Hong Kong, were said to be 'on a business trip'.

Mr Wong, recently appointed to the top job in Hong Kong, retains his role as head of consumer banking at Standard Chartered.

But banking sources said the auction that got under way in mid-June had gone to the wire, with Standard Chartered emerging as the winner.

Chase Manhattan's exodus from retail banking in Hong Kong was in line with a global strategy of quitting consumer banking to focus on wholesale and investment banking. It has acquired investment bank Robert Fleming and its Asian arm, Jardine Fleming.

In mid-June when the news broke that the bank's retail business in Hong Kong was up for sale, analysts forecast an aggressive bidding war since cash-rich Hong Kong banks were struggling to increase their loan books organically.

'If this business is really up for sale it would be hot property,' Lehman Brothers banking analyst Grant Chan said.

'We are in a market that is showing no loan growth and consumer loans are high-yielding.

'They would be very desirable assets in the present circumstances.'

The starting point in the pricing exercise by bidders would have been the jewel in Chase's retail crown in Hong Kong - its credit-card company - which made a profit last year of HK$2.26 billion, on credit-card receivables of HK$5.45 billion and total assets of HK$7.72 billion.

A summary disclosure of branch banking assets made to the Hong Kong Monetary Authority put the total Chase loan book at HK$110.2 billion.

If the retail banking business generated an operating margin at the sector benchmark levels of between 2 per cent and 3 per cent on these assets, operating income might have been somewhere between HK$2.2 billion and HK$3.3 billion.

Applying an industry benchmark cost-to-income ratio of about 50 per cent suggests that net earnings from the branch business (which discloses no fee income) would therefore have been somewhere between HK$1.1 billion and HK$1.65 billion.

Added to the card company's profit, that would have meant earnings for the retail banking business of between HK$3.36 billion and HK$3.91 billion.

Since the best-guess of bankers and analysts was that bids might have been pitched at somewhere between two and four times earnings, the auction might have got underway with offers of at least HK$6.72 billion, rising to well above this level.

Key to the final outcome of the bidding process would have been the multiple the winner was willing to pay either on the book value of the assets, or the earnings. In the case of the DBS Bank purchase of an 87.27 per cent stake in the 32-branch Kwong On Bank last year, the takeover was secured at a discount to book value.

But banking sources suggested this was unusual and arose because Fuji Bank of Japan wanted to quit its 50.1 per cent stake without protracted negotiations.

That discount was not likely to have been secured in the Chase Manhattan deal particularly since the auction went down to the wire, with two aggressive competitors slugging it out in the final bidding war.



As rivals fight it out, DBS Bank may have failed in its attempt to take control of prized consumer unit