Standard Chartered Plc Business Information, Profile, and History

History of Standard Chartered Plc

Standard Chartered PLC is the parent company of a number of banks and financial service companies spread across the world. Its largest subsidiary is Standard Chartered Bank, which accounts for the overwhelming majority of its operations. Standard Chartered is in some ways a relict of the British Empire. Standard Chartered was formed in 1969 as a merger between the Standard Bank, which did business throughout Africa, and the Chartered Bank, which operated branches throughout India, China, and southeastern Asia. Lacking a truly strong domestic network, the banking group's progress has been largely dependent upon Third World economic and political conditions, an unenviable position at times.

Both the Standard Bank and the Chartered Bank had been in operation for more than a century when they combined forces. The Chartered Bank, originally incorporated in 1853 as the Chartered Bank of India, Australia, and China under a charter from Queen Victoria, was influential in the development of British colonial trade throughout Asia. Up until World War II, British trade in Asia flourished, and the Chartered Bank prospered.

The Standard Bank was established in 1862 as the Standard Bank of British South Africa by a schoolmaster named John Paterson. Paterson had eclectic interests, including mining, railroad promotion, and real estate development. He set out to make Standard a large bank, and proceeded to acquire smaller banks throughout southern Africa. For the next century, the bank played a significant role in the banking of the region.

Since both banks were products of the colonial era, with similar structures and experience, they made an excellent match. Their complementary geographic coverage and similar historical backgrounds made for a relatively smooth transition.

The new Standard and Chartered Banking Group took its time integrating the management of the two banks. Throughout 1970 each former unit performed its operations more or less unchanged--indeed, bank branches continued to operate under their old names for a number of years. Each was able to expand independently in its own markets, and there was no need to immediately restructure either bank's operations. But the company slowly began to develop long-term plans for the entire bank.

Standard Chartered's first chairman, Sir Cyril Hawker, came to the group from the Bank of England, where he had served since 1920. His sensitivity to the needs of developing nations made him an excellent choice to guide Standard Chartered in its early years. In 1970, Hawker brought Standard Chartered deeper into the eurocurrency markets. Both the Standard Bank and the Chartered Bank had entered these markets in the 1960s. By 1970, Standard Chartered was using funds generated in the Euromarkets to finance projects throughout the world.

Because of its Third World involvement Standard Chartered has had to deal with more problems than most banks. Unstable political and economic conditions pose a constant threat to the bank. During the 1960s some branches were nationalized by the countries they operated in. In the 1970s, though conditions were generally calmer, Standard Chartered had to be prepared to adapt to the whims of sometimes irrational governments in Africa and Asia. Wars and rebellions were a constant threat. When new regimes came to power, Standard Chartered's branches were at times subject to new regulations, nationalization, or a transfer of ownership to native financiers. In 1970, for example, the African nation of Zambia partially nationalized the Standard Bank operating there. Nationalization was the greatest fear of any overseas bank operating in politically unstable countries. But at the same time, these regions were often very profitable.

In 1971, the Eastern Bank, a Middle Eastern bank Chartered had acquired in 1957, became fully integrated with the Chartered Bank. The Standard Bank's Nigerian branches had a good first year in the reconstruction period after the civil war there ended in 1970. Operations in Hong Kong, Singapore, and Malaysia showed strong results in the early 1970s, although depressed economic conditions in South Africa resulted in a poor performance for the Standard Bank branches operating there. Nevertheless, the bank's dependence on the unreliable conditions of Third World nations induced it to seek a stronger foothold in industrialized nations to add stability to its international network. Throughout the early 1970s, the bank increased operations in European and American capital markets and began to cooperate with other international banks.

In 1973, the banking group diversified heavily. The acquisition of Mocatta and Goldsmid Ltd. brought Standard Chartered into the gold and precious metals markets. The group's computer leasing company, Standard and Charted Leasing, expanded into European markets. The banking group also formed a partnership in a merchant bank.

By 1974, Standard Chartered's gradual integration was complete and the managements of the Standard Bank and of the Chartered Bank came together under one roof. In August of 1974, Sir Cyril Hawker retired and was replaced by Lord Barber. Barber oversaw the formulation of a long-term strategy for the bank. Standard Chartered would concentrate on what it did best: overseas commercial banking. Unlike a growing number of international banks during this period, Standard Chartered did not intend to branch into other areas of financial services. The bank would continue to strengthen its European position to offset fluctuations in Third World economies, but would not attempt to enter retail banking in Britain. The 17 British branches Standard Chartered already operated focused on import-export financing and banking support services.

In 1974, Standard Chartered's diversity was key in insulating it from a worldwide recession. In October of 1975, the group changed its name to the Standard Chartered Bank Ltd., although subsidiaries throughout the world still operated under their old established names.

The bank grew throughout the late 1970s. Profits improved consistently, and assets continued to grow. In 1979, Standard Chartered made a major acquisition in the United States by purchasing the Union Bancorp of California.

As international banking competition became more intense, Standard Chartered's management began to see weaknesses in the bank's lack of a domestic base. In 1981, the group bid on the Royal Bank of Scotland Group. This bank had the domestic branch network that Standard Chartered wanted and was amenable to a takeover by Standard Chartered. But a rival bid by the Hongkong and Shanghai Bank sent the issue to the British Monopolies Commission, which ruled against both bids. The banking group entered the 1980s heavily reliant on the financial success of underdeveloped nations.

The 1980s were difficult times for many of the countries where Standard Chartered operated. Singapore and Malaysia fell into a serious recession in the mid-1980s. As Hong Kong's shipping industry struggled to survive, a number of large loans went bad, putting Standard Chartered in serious financial straits. By 1986, the Standard Chartered Bank was in a financial mess. The bank's strategy of focusing on commercial banking proved to have been an error, as large customers were choosing international banks that could provide them with a complete line of financial services, including stockbroking and issuing commercial paper. Capital markets and money markets were deregulated in many countries in 1986, leading to increased competition for which Standard Chartered was unprepared.

Standard Chartered's affiliate in South Africa had performed inconsistently in the 1980s, but was for the most part a profitable venture. Growing political pressure to divest South African holdings caused the bank some unrest. Standard Chartered was reluctant to sell its 39% interest in the bank at the unfavorable exchange rate of the time and take a large loss. Finally, in 1987 the bank divested its South African holdings, ending its 125-year presence in that nation. It was the last foreign bank to leave South Africa.

In 1986, London saw an explosion of mergers and acquisitions among banks with the financial deregulation known as the "Big Bang." Standard Chartered became the target of a takeover by Lloyds Bank, which Standard Chartered's chief executive, Michael McWilliam, was determined to prevent. The purchase of 35% of Standard Chartered's shares by three businessmen helped to thwart the Lloyds bid. Standard Chartered received a thrashing in the British press when it became known that one of its white knights, Tan Sri Khoo, had received a large loan from the bank just before he invested in its shares, but the bank called for an investigation to clear its name and was vindicated by the Bank of England a year later.

Although Standard Chartered was successful in warding off the hostile takeover by Lloyds, its troubles were not over. The banking community's dependence on the Third World caught up with it in 1987, when, due to larger loanloss provisions, Standard Chartered showed a net loss of £274 million. McWilliam tried to restructure the bank's operations and replaced many high-ranking executives. Chairman Sir Peter Graham stated that the bank needed to inject new capital through a rights issue. In 1988, the bank reversed its position on divesting non-core assets to raise capital and sold the United Bank of Arizona to Citibank and later, its profitable Union Banking group to California First, a subsidiary of the Bank of Tokyo.

Standard Chartered's situation began to improve in 1988. A new rights issue in September of 1988 helped repair the bank's capital balance. Profits for the first half of 1988 were £154 million compared to a loss of £222 million during the same period a year before. McWilliam, who had directed the bank's operations during its stormiest year, resigned in early 1988 and Sir Peter Graham, who had been chairman for only two years, retired. Rodney Galpin took over as both chairman and chief executive. Galpin had spent most of his career at the Bank of England and intended to be a "hands-on" chairman.

Standard Chartered has had to adjust its structure and policy to meet a rapidly changing international financial marketplace. The bank still lacks a strong footing in Great Britain or North America, but has made a stronger domestic base a goal. As Standard Chartered strengthens its financial position, it also makes itself a more attractive acquisition target. It remains to be seen whether or not the bank will be able to continue to grow independently or will choose to link up with another bank.

Principal Subsidiaries: Standard Chartered Bank; Standard Chartered Bank Africa PLC (Lesotho); Standard Chartered Bank Australia Ltd.; Standard Chartered Bank (Switzerland) AG; Standard Chartered Bank Botswana Ltd.; Standard Chartered Bank Cameroon S.A.; Standard Chartered Bank (C.I.) Ltd.; Standard Chartered Bank Gambia Ltd.; Standard Chartered Bank Ghana Ltd.; Standard Chartered Bank Ireland Ltd.; Standard Chartered Bank (Isle of Man) Ltd.; Standard Chartered Bank Kenya Ltd.; Standard Chartered Bank of Canada; Standard Chartered Bank Sierra Leone Ltd.; Standard Chartered Bank Swaziland Ltd.; Standard Chartered Bank Uganda Ltd.; Standard Chartered Bank Zambia Ltd.; Standard Chartered Bank Zimbabwe Ltd.; Standard Chartered Acceptances Ltd. (Kenya); Standard Chartered Asia Ltd. (Japan); Standard Chartered Australia Ltd.; Standard Chartered Finanziaria SpA (Italy); Standard Chartered Merchant Bank Ltd. (Chile); Standard Chartered Merchant Bank Asia Ltd. (Singapore); Standard Chartered Merchant Bank Zimbabwe Ltd.; CEC Finance Ltd.; Chartered Trust PLC; Credit Corporation (Brunei) Berhad; Credit Corporation (Singapore) Ltd. ; P.T. Standard Chartered Leasing; Standard Chartered Export Finance Ltd.; Standard Chartered Finance Ltd. (Australia); Standard Chartered Finance Ltd. (Hong Kong); Standard Chartered Finance Ltd. (Singapore); Standard Chartered Finance Uganda Ltd.; Standard Chartered Finance Zimbabwe Ltd.; Standard Chartered Leasing Company Ltd.; Mocatta Commercial Ltd.; Mocatta & Goldsmid Ltd.; Mocatta Hong Kong Ltd.; Mocatta Metals Corporation (U.S.); Scimitar Asset Management Ltd.; Standard Chartered Fund Managers (C.I.) Ltd.; Standard Chartered Bank Hong Kong Trustee Ltd.; Standard Chartered Trustee Singapore Ltd.; Standard Chartered Futures (S) Pte Ltd.; Standard Chartered Trustees AG; Standard Chartered Trust Zimbabwe Ltd.; Standard Chartered International Trustee Ltd.