LONDON, Jan 10 (Reuters Breakingviews) - Tahnoon bin Zayed al-Nahyan may not be done with Standard Chartered (STAN.L) . First Abu Dhabi Bank (FAB) (FAB.AD) , the $50 billion Gulf lender that the brother of the United Arab Emirates’ president chairs, last week said it had considered a bid for the $23 billion UK-listed bank. With StanChart shares still above their pre-speculation level it’s not impossible FAB, 38% owned by state investment fund Mubadala, tries again.

In one sense, the approach reflects the bullishness engendered by the UAE’s newly swollen oil wealth. But buying StanChart also has strategic logic. Half its revenues come from Hong Kong, China and other Asian countries, where much of Abu Dhabi’s oil goes. The UAE has signed multiple trade deals with countries like India in the last year. StanChart’s commodities trading strength fits with Abu Dhabi’s keenness to become an energy trading hub.

StanChart is also cheap. Even with a 30% equity premium FAB could snap up StanChart for $30 billion, or around 70% of expected tangible book value. That’s a 28% discount to other Asia-focused lenders, according to Breakingviews calculations. Not bad for a bank that Barclays analysts reckon could make a 10% return on tangible equity in 2024. FAB may think it can hack back StanChart’s costs, which are two-thirds of income.

The obvious stumbling block is capital. StanChart’s balance sheet is three times FAB’s $300 billion, and the UK bank’s $253 billion of risk-weighted assets dwarf the UAE bank’s $158 billion. Post-2008 global rules penalise banks for being bigger and more complicated, which means the combined group might have to hold extra capital to the tune of around 0.5% to 1% of risk-weighted assets. That’s potentially an increase of $2 billion to $4 billion, according to Breakingviews calculations.

Tahnoon may see this as too much bother. After all, he would have a job persuading Singapore wealth fund Temasek, which holds 16% of StanChart, to accept what would presumably be an all-share merger in which FAB would hold 62% of the combined entity. Temasek might also baulk at supporting a potential $4 billion rights issue to fill a capital hole. StanChart’s structure of national fiefdoms may complicate cost cuts, regulatory approvals and may even add to capital.

That said, Mubadala could just deploy some of the UAE’s enlarged $125 billion of net oil export revenues in 2022 to up its stake. And Tahnoon’s other job chairing IHC (IHC.AD) , a UAE company whose valuation has soared to $240 billion in double-quick time , suggests a man in a hurry. A second punt for StanChart, or some choice bits of it, is far from impossible.

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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

CONTEXT NEWS

First Abu Dhabi Bank (FAB) on Jan. 5 said it had considered a bid for London-listed Standard Chartered but was no longer doing so.

Bloomberg had earlier reported that FAB had been exploring an offer for Standard Chartered as part of a plan aimed at building an emerging markets bank, driving StanChart shares up as much as 20%.

The Abu Dhabi lender said it had been in "the very early stages of evaluating a possible offer".

As of 1035 GMT on Jan. 10 StanChart shares were trading at 685 pence, compared with 662 pence level before the Bloomberg report.

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