What’s going on with the Standard Chartered share price?

Shareholders are sometimes sleepy Standard Chartered (LSE: STAN) like me was also surprised to see the bank’s share price rise this week. Although the stock price has fallen slightly in early trading on Friday, as I write this, it is still up about 11% compared to last week.

Why, and what does this mean for my shareholding?

Speculation offers

The immediate cause of the jump is the press report that First Abu Dhabi Bank has spent several months exploring a potential takeover bid for a London-based bank focused on expanding markets around the world.

This was enough to increase Standard Chartered’s share price. But even though the Emirati bank is running a slide rule on Standard Chartered, it has yet to make an offer. Since the report was published yesterday, the Abu Dhabi agency reportedly said that “never“Exploring the potential for deals.

What happened next

This does not mean that an offer may not appear at some point. The news that rivals have spent months eyeing Standard Chartered as a target could potentially rule out other potential suitors. I think that explains why Standard Chartered’s share price remains up this morning despite the negative news from Abu Dhabi.

However, I have doubts about how long the stock will remain at its current level in the absence of new offers. But other offers – for example by rivals who consider Standard Chartered’s shares undervalued – could increase the bank’s share price significantly.

But I still see First Abu Dhabi as a potentially strategic candidate. By combining Standard Chartered’s strength in emerging markets with its own operations, the bank can unlock strategic synergies in developing countries. So, while Standard Chartered may appeal to strategic buyers, I think it may appeal less to financially motivated buyers. A strategic combination may bring a lower bid premium than a financial takeover.

I caught it

The more interesting move in Standard Chartered’s share price for me as an investor is not what happened this week, but the 45% increase seen last year.

I share the market rerating of the bank’s strategic exposure to some fast-growing international markets. That’s how it competes HSBC, with a strong foreign track record of its own, has seen its shares rise 18% in the past 12 months. The domestically focused competition is getting worse over time. NatWest up only 6%, while Lloyds has decreased by 8%.

The latest news suggests that other banks are eyeing the potential profits from a strong foothold in Asian and African markets that are growing fast as economies recover after a year of pandemics.

In the long run though, investing in the bank is dead money. Standard Chartered’s share price is 17% below what it was five years ago. I will continue to hold my shares for now. But if an applicant comes along and makes a reasonable offer, I’ll be happy to take the money.