INVESTORS are calling on Standard Chartered to come clean on its need to raise billions of pounds in capital amid a warning that Peter Sands, the bank’s chief executive, has only months to turn the business around.
An investor with a significant holding in the bank, which is focused on emerging markets, suggested yesterday that a large rights issue was “inevitable” and that the amount of money it would need to raise would be a “big number”.
Another leading shareholder said that Mr Sands had three months to turn round the bank and that unless he was able to deliver an improvement Sir John Peace, the chairman, was expected to begin looking for a replacement.
Speculation over a possible rights issue, which some think could be as large as $10 billion, comes as Mr Sands embarks on an Asian tour to promote his plans for the bank.
Mr Sands and senior executives are holding investor meetings in Hong Kong this week to explain how they intend to improve the business’s performance. Last month, the bank reported a 16 per cent fall in third-quarter profits.
A shareholder who asked to remain anonymous said that a rights issue could happen relatively quickly: “The need for capital is becoming more and more obvious.”
Chirantan Barua, a banks analyst at Sanford C. Bernstein, said: “This bank needs a big capital injection and soon. It needs $6 billion to $7 billion just to cover its legacy loan book and bridge the capital gap to HSBC. The missing number is still a potential settlement with the US authorities around withheld information at the time of the initial deferred prosecution agreement. Only when that number is clear will the bank be ready to approach the markets.”
Last month prosecutors in the United States reopened an investigation into potential sanctions breaches by the bank. It has been alleged that it failed to disclose evidence of violations of sanctions with Iran at the time its deferred prosecution agreement was signed in 2012.
Mr Barua estimates the size of any fine resulting from the investigation at between $1 billion and $9 billion after BNP Paribas, France’s largest bank, agreed in July to pay a $9 billion penalty to close a sanctions violations case.
Standard Chartered shares have fallen by 15 per cent in the past month and have lost more than a third of their value in the past year amid questions about the quality of the bank’s lending and its business model.
Sir John told senior managers at the bank last week that the business was “in a transition” but that its model was “not broken . . . It just needs to go in for its ten-year service and we are in there for that ten-year service now.”
The board of Standard Chartered has given its backing to Mr Sands and in the summer Sir John issued a statement backing his leadership.
In a statement, Standard Chartered said: “We have no plans to raise capital and have stated that we will manage the group to be capital accretive in order to fund growth and meet regulatory requirements.” It said that the bank was well capitalised.
The Times
