The market is not beaming with enthusiasm over Standard Chartered’s purchase of the Korea First Bank. Standard’s stock price dropped 2.2%, and SG Cowen downgraded the UK-based bank that does most of its business in Asia to hold from buy giving preference to the rival HSBC that lost the bidding war for Korea First.

The bank "paid has paid a high price, which would only be justified by strong revenue growth assumptions," the broker told clients. "There is a risk that these will not be achieved, as Standard Chartered does not have a strong track record on revenue growth."

Standard Chartered executives on the contrary were optimistic as they revealed plans to strengthen Korea First’s divisions offering consumer loans, credit cards, mortgages, wealth management and business services.

"This acquisition provides Standard Chartered with a strong platform in the 10th-largest economy in the world," Kai Nargolwala, Standard Chartered’s group executive director for Asia, said at a news conference. "Korea is also the third-largest banking market in Asia, and has a banking revenue pool of $44 billion."

Standard Chartered announced yesterday the $3.3 billion acquisition of the Korea First Bank. The British bank makes 65% of its profit in Asia, and the acquisition will raise Korea to the level of Standard’s second-important market after Hong Kong. The Korean bank will amount to 22% of Standard’s assets
The transaction will be financed through the sale of about $1.87 billion worth of stock and values the Korea First Bank at 1.87 times its book value.

"It is a big step towards our aspiration to lead the way in Asia, Africa and the Middle East," said Mervyn Davies, chief executive of Standard Chartered. He described Korea First Bank as a "well managed, conservatively run bank with a highly skilled workforce."