StanChart in advanced talks to sell HK consumer unit to Australia's Pepper

By Reuters

Sep 23, 2014 03:05 AM EDT

Standard Chartered (STAN.L) is in advanced talks to sell its Hong Kong consumer finance business to finance firm Pepper Australia Pty Ltd in a deal that could fetch between $500 million to $700 million, people familiar with the deal said.

Standard Chartered is sharpening its focus on global corporate banking and high net worth clients. High-risk, unsecured lending to Asian consumers doesn't fit with its current outlook.

The sale of the Hong Kong consumer finance unit is among the initial few divestures being pursued by Standard Chartered as it tries to address share price underperformance and difficulties inmarkets such as South Korea.

Earlier this year, Standard Chartered sold two businesses in South Korea to Japanese lender J Trust (8508.T) for $148 million as part of the London-based bank's attempt to boost profitability and simplify its Korean business.

Pepper and Hong Kong-based Chow Tai Fook Enterprises were the top two contenders for the Standard Chartered unit PrimeCredit, racing ahead of other bidders after two bidding rounds, the people familiar with the deal said.

The people declined to be identified because the details of the talks are not public.

The deal is subject to approval from the Hong Kong Monetary Authority (HKMA), the city's de facto central bank.

"They were picked as a preferred bidder a couple of weeks ago, and are now in the process of going through the HKMA approval process," one person familiar with the matter said.

The bank is going through a tough period following big losses in Korea, a slowdown in investment banking and the impact of tougher regulations. It warned in June that profit would fall in 2014 for a second straight year.

Standard Chartered is also trying to sell its Swiss private bank as it focuses more on Asia, Africa and the Middle East.

The bank's CEO Peter Sands told a post-earnings briefing last month that the consumer finance business in Hong Kong was a very good business, but it considers the unit "non-strategic."

A spokeswoman for Standard Chartered declined to comment, while an external spokeswoman for Pepper also declined to comment.

Pepper is a specialty mortgage lender, third-party loan servicer and an asset manager, with businesses in the United Kingdom and Australia.

If it wins the deal, Pepper is expected to run the business with the help of Bank of East Asia Ltd (0023.HK), by transferring PrimeCredit's mortgage book to the Hong Kong bank, sources said in July.

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