Published by The Telegraph – 1st November 2016
Standard Chartered faces the threat of a financial hit in Hong Kong after the troubled emerging markets-focused lender revealed it was being investigated over its handling of a stock market float, in what marks yet another regulatory blow to the bank.
The FTSE giant disclosed that the Hong Kong Securities and Futures Commission (SFC) has warned the lender that it “intends to take action” against the bank for its role as a joint sponsor on a share sale seven years ago, understood to be the initial public offering of China Forestry. The probe could have “financial consequences” for Standard Chartered, the lender warned in its third quarter results.
Standard Chartered worked on the float of the timber producer alongside UBS and last week it emerged that the Swiss bank was also being investigated by the SFC for its role in a number local IPOs. It is thought the China Forestry share sale is among the floats in the UBS investigation, which could result in the Swiss lender being temporarily suspended from offering corporate finance services in Hong Kong.
Standard Chartered’s boss Bill Winters said that because his bank no longer handles IPOs in Hong Kong, the probe did not pose a big risk to revenues.
“The degree to which this will have an ongoing impact on our revenues is very limited from what we can see,” he said.
Shares in China Forestry were suspended five years ago and the logging group is now in liquidation after questions were raised over its accounts. Spokesmen for Standard Chartered and UBS declined to comment on the IPOs that the SFC is investigating.
It is a further regulatory headache for Standard Chartered. The bank is already bound by a deferred prosecution agreement in the US, which it struck in 2012 to settle allegations it breached sanctions against Iran. An Indonesian power company it controls also faces bribery allegations, which are now the subject of a US Department of Justice investigation.
The Hong Kong probe also adds to the more wide-ranging hurdles facing Mr Winters, who took the helm at Standard Chartered last June and is tasked with reviving the struggling lender’s fortunes.
Shares in the bank slumped as much as 7.2pc this morning after it posted an adjusted quarterly pre-tax profit of $438m, which was an improvement on the $139m loss it posted a year ago but was well short of the $520m that analysts had expected. Mr Winters conceded that “profit levels are not yet acceptable” but insisted that “the areas in which we have invested are beginning to show some signs of life”.
To shore up its finances, Mr Winters has scrapped Standard Chartered’s dividend, raised $5.1bn from a rights issue and outlined plans to cut over 15,000 jobs, measures that have hurt revenues. Earlier this year, Standard Chartered posted its first full-year loss since 1989 after the bank was hit by bad loans and the cost of Mr Winters’s overhaul.
Third quarter revenues fell 5.9pc to $3.47bn compared with a year earlier, rattling analysts and investors who were looking for signs of improvement. Loan impairments declined 5pc quarter-on-quarter by Standard Chartered conceded the level “remains elevated”.
Its common equity tier one capital ratio – a measure of its financial buffers slipped to 13pc from 13.1pc. The lender also disclosed that the Bank of England’s Prudential Regulation Authority had lifted its minimum requirement for the ratio to 9.8pc from 9.2pc, a move finance chief Andy Halford had said was not linked to “any one particular thing”.
