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 shares pared the gains to trade up 6% at 1421 GMT following FAB's statement that it was no longer pursuing a potential deal.

The Abu Dhabi lender said it had been in "the very early stages of evaluating a possible offer" for the emerging markets-focused bank. Standard Chartered declined to comment on Thursday.

The Gulf region is witnessing an economic boom fuelled by higher oil prices in the wake of Russia's war on Ukraine, with sovereign wealth funds and banks on the hunt for deals amid a weakened global outlook.

Saudi National Bank in October announced it was investing up to $1.5 billion in Credit Suisse, representing a stake of up to 9.9%.

StanChart, which operates in 59 markets worldwide and has around 85,000 staff, has struggled in recent years to increase its revenue after Chief Executive Bill Winters spent the early part of his tenure repairing its balance sheet and slashing thousands of jobs.

The bank in October said rising interest rates should boost its income, allowing it to increase its revenue targets despite the weakening global economy.

StanChart has been the subject of periodic takeover rumours in media reports over the last decade, with Barclays and JPMorgan among potential suitors named in such stories, although no deal has ever come to pass.

Standard Chartered "is a bank that, while domiciled in the UK, is primarily focused on Asian, African and Middle Eastern markets," said Stuart Cole, head macro economist at Equiti Capital.

"Given the pessimistic outlooks for the UK, US and EU at the moment, a take-over would give the buyer instant access to these largely developing and emerging markets and could therefore be seen as a good move strategically," Cole said.

(Reporting by Hadeel Al Sayegh in Dubai, Shreyashi Sanyal and Aby Jose Koilparambil in Bengaluru; Lawrence White and Lucy Raitano in London; Editing by Shinjini Ganguli and Emelia Sithole-Matarise)

By Hadeel Al Sayegh, Shreyashi Sanyal and Lawrence White