Standard Chartered starts taking over Barclays custody services

Standard Chartered Bank in Kenya (www.standardchartered.com/ke/en/) is to issue KSh 2.5 billion ($30.2 million) in new shares in order to buy the custody business of Barclays Bank of Kenya, according to a Reuters report. Chief Executive Officer Richard Etemesi said the total cost of the transaction was KSh 1.9 billion ($22.7 million) and other proceeds will go into expanding the bank’s ordinary business. The new shares will raise Standard Chartered’s authorised share capital to KSh 1.78 billion from 1.365 billion.
On 27 April the bank announced that it had agreed to acquire the African custody business from Barclays Bank PLC. The acquisition is subject to certain regulatory and other approvals, and is expected to be completed this year. The African custody business forms a key part of Standard Chartered’s widening network of of international custodian services, alongside existing capability in Asia and the Middle East. The Africa-wide acquisition adds direct custody capabilities in 8 African markets (Botswana, Ghana, Kenya, Mauritius, Tanzania, Uganda, Zambia and Zimbabwe) and indirect capabilities in a further 8 markets (Egypt, Cote d’Ivoire, Malawi, Morocco, Namibia, Nigeria, Tunisia and South Africa) through a network of third-party sub-custodians via an operations hub in Mauritius.
Commenting on the deal Karen Fawcett, Group Head of Transaction Banking at Standard Chartered, said: “We are very pleased to have secured the acquisition of Barclays’ African Custody business. This deal will enable Standard Chartered to rapidly develop our custody capabilities in our core markets across Africa. We are already seeing ongoing demand for regional and international investment services across this region. Standard Chartered remains committed to providing clients with an integrated set of solutions that promote ongoing growth of this industry. With this acquisition, we will enhance our custody offering and continue to gain a strong foothold as core bank to our clients in Africa.”
The new business will strengthen Standard Chartered’s regional product offering for both international and regional businesses, strengthening client relationships, whilst providing an additional source of liquidity to the Group.
The Reuters report cites Etemesi as saying the deal will be particularly important for Asian investors looking for returns in the African market: “One rationale behind the acquisition of the custody business is to give our Asian customers opportunity to invest in African capital markets.” He said revenue from the business should be about KSh 1 billion ($12.5 million) by the end of 2012, from about KSh 600 million currently.
According to the bank’s website, it is the oldest foreign bank in Kenya (established 1911) and has over 1,000 employees, 32 branches and 27% market share. In March the bank announced that it had increased pre-tax profits for the year ending December 2009 by 43% to KSh 6.7 billion. Revenues grew by 22% to KSh 12.4 billion while expenses grew by only 3%; loans and advances to customers grew by 31% to KSh 56.7 bln while customer deposits grew 13% to KSh 86.8 bln. In 2009, the bank invested heavily in technology anticipating that it would be the main driver for business growth in the banking sector in future, including in systems infrastructure and technology-based products and services as well as standardising technology platforms to become more nimble and able to anticipate and respond to the changing business environment.
The rights issue and the acquisition are subject to regulatory approval.

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