Shinsei, Carlyle short-listed in StanChart HK unit sale, say sources-Reuters

HONG KONG/SINGAPORE (Reuters) – Japan’s Shinsei Bank Ltd and Carlyle Group are among suitors who have advanced to a final round of bidding for Standard Chartered‘s Hong Kong consumer finance unit, people familiar with the matter said.

The unit, PrimeCredit, has drawn bidders with returns on equity of more than 40 percent that are sharply above rivals, and could fetch between $500 million and $700 million, sources have previously said.

That would be roughly equivalent to 2-3 times book value, and compares with recent Hong Kong banks deals that have been struck at a price-to-book ratio of about two. Standard Charted acquired the specialist in high interest loans in 2004 for HK$980 million ($126 million).

Other short-listed bidders include non-bank lender Pepper Australia, United Asia Finance, a Hong Kong-based consumer finance firm and Chow Tai Fook Enterprises, a private company owned by Hong Kong’s Cheng family, the people added. The Cheng family also owns Chow Tai Fook Jewellery Group Ltd (1929.HK: Quote, Profile, Research, Stock Buzz).

Final round bids are due next month, one of the people told Reuters. Sources declined to be identified as the sale process is confidential.

Shinsei, which is backed by U.S. private equity firm J.C. Flowers & Co, declined to comment, as did Carlyle, Pepper Australia and Chow Tai Fook Enterprises. Representatives for United Asia Finance were not available for immediate comment.

Standard Chartered also declined to comment.

Having boosted profits during the wave of cheap credit that poured into emerging markets for the past decade, Standard Chartered is now slimming down as foreign money exits cooling Asian economies. It cut 2,000 jobs last year.

Prime Credit’s business is centered on high-risk, unsecured lending to consumers with scant credit history, and doesn’t fit with Standard Chartered’s core focus on global corporate banking and high net worth clients, sources said.

Standard Chartered is also selling its consumer finance business in South Korea, which has proved to be a tough market for foreign banks amid rising costs and intense competition.

The streamlining by Standard Chartered follows a bigger move by key local rival HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz). The latter has sold or closed 63 businesses in the last three years in an effort to simplify its structure, reduce risk and boost profitability.