American Express to sell international banking unit

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AXP59.35, +1.15, +2.0%) said it will get $300 million plus the net asset value of American Express Bank in cash, which would have totaled around $860 million at June 30.

In addition it expects to realize roughly the net asset value of a subsidiary that issues investment certificates to the bank's customers. That should be worth an additional $212 million and will come through dividend payments and a further payment from Standard Chartered (UK:STAN: news, chart, profile) after 18 months.

"Today's agreement reflects our strategic focus on the high-growth, high-return payments businesses that have been driving our performance in recent years," said CEO Kenneth Chenault.

The sale won't include any of its card or travel businesses.

The deal is expected to close in the first quarter of 2008 and should have a roughly break-even impact on earnings, though this will be spread across several quarters. In the current quarter, American Express expects to take a charge of $50 million.

American Express Bank's operations include correspondent banking -- where it provides services to banks without a local presence -- and private banking in 47 countries.

Standard Chartered, which focuses on emerging markets and Asia, said the deal will double the size of its dollar clearing business as well as providing the group with direct euro and yen clearing operations.

In addition American Express Bank's $22.5 billion of assets under management will kick-start Standard Chartered's recently launched private banking business and provide branch licenses in India and Taiwan.

"This acquisition turbo-charges our plan for private banking by two to three years," CEO Peter Sands told analysts on a conference call.

He added it also gives the bank a foothold in Egypt and Kazakhstan and will improve its ability to service European corporate clients through offices in Paris and Frankfurt.

Shares in American Express climbed 0.3% in early Wall Street trading. See Market Snapshot.

Shares in Standard Chartered remained solidly higher after the announcement, standing up 3.4% amid a broader rally for the banking sector in London. See London Markets.

Cubillas Ding, an analyst with Celent, said the deal appears to be a defense against the likes of UBS (UBS:

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UBS52.08, +0.69, +1.3%) , Credit Suisse (CS:

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CS64.54, +0.74, +1.2%) and Citigroup Inc. (C:

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C46.65, +0.62, +1.3%) , which are focusing their private banking operations on Asia.

"This response is therefore decidedly required to both defend and grow in Asia, and to avoid playing difficult catch-up scenario," Ding said.

Standard Chartered said it expects to generate pretax costs savings in excess of $100 million a year from 2009 onward and added the deal should boost earnings per share in 2009, the first full year of ownership.

"American Express Bank's balance sheet is highly liquid and its income is predominantly fee-based. This is a transaction which has compelling strategic and financial logic and is management accretive," Sands said.
Source: www.marketwatch.com

Japanese PM candidate Vows to Stay Away from Controversial Shrine

The campaign to succeed Japanese Prime Minister Shinzo Abe, who announced his intention to resign earlier this week, is now officially down to two candidates, and their comments have already provided some clues to what Japan's post-Abe foreign policy might look like. Catherine Makino reports from Tokyo.

Yasuo Fukuda (file photo)

The former chief cabinet secretary, 71-year-old Yasuo Fukuda, appears to be the leading candidate to replace Mr. Abe. His opponent is the former foreign minister and current leader of the ruling Liberal Democratic Party, 66-year-old Taro Aso.

Fukuda is a political moderate, who says his aim is to create warm relations with Japan's neighbors, especially China and South Korea. Aso, a conservative, has annoyed China in the past with disparaging remarks.

Japan's relations with the two countries deteriorated badly during the tenure of Mr. Abe's predecessor, Junichiro Koizumi. A major reason was Mr. Koizumi's insistence on making regular visits to Tokyo's Yasukuni Shrine, which honors 14 convicted war criminals among Japan's 2.5 million war dead. Japan's neighbors see the shrine and the visits as glorification of the country's militaristic past.

On Saturday, Fukuda said prime ministers should not visit the shrine, and said he would not do so if elected. He suggested removing the irritant of Yasukuni altogether by building a new memorial.

He says he supports an alternative place to honor the soldiers and civilians who died during World War II. He says there should be one centralized memorial, but he would need public support for this.

Aso has defended Mr. Koizumi's visits to the shrine in the past and hinted he might do the same. He was circumspect Saturday when asked what he would do if elected.

He says his thoughts are the same as he stated in a recent newspaper interview. Just because a memorial has been built, he says, does not mean that it will not disappear.

Both candidates say they will support an extension of the Japanese navy's support mission for U.S.-led operations in Afghanistan. Mr. Abe has also fought for an extension of the mission, in which Japanese ships in the Indian Ocean provide fuel for U.S. and other coalition forces.

The extension is opposed by the main opposition, the Democratic Party, which controls the upper house of the Japanese parliament. A survey by the Asahi Shimbun this week shows that the public is also opposed to the mission, with 45 percent against and only 35 percent in favor.

Both candidates say they support Japan's hard line against North Korea. Pyongyang wants normalized relations with Japan, but the Japanese have demanded more details about Japanese citizens kidnapped by North Korean agents during the Cold War.

Aso said Japan could not engage in a dialogue with North Korea "without pressure." Fukuda said Japan's basic stance should not change, but he suggested that Tokyo should try harder to explain its position to Pyongyang.

Most factions of the ruling party, of which both men are members, have already pledged their support to Fukuda, and opinion polls also show that the public prefers him.

Sources