Standard Chartered said to weigh raising at least US$4b to address funding gap

The logo of the Standard Chartered bank is seen in Hong Kong.
The logo of the Standard Chartered bank is seen in Hong Kong.PHOTO: AFP

LONDON (BLOOMBERG) - Standard Chartered has held discussions with bankers on raising at least US$4 billion (S$5.6 billion) as British regulators toughen scrutiny on lenders with exposure to emerging markets in a second round of stress tests, people with knowledge of the plan said.

While the bank has discussed the option of raising capital, no final decision has been made on whether to proceed with a share sale, said the people, who asked not to be identified because the talks are private. The London-based lender may need as much as US$8 billion to address a funding gap, according to the people.

Standard Chartered chief executive officer Bill Winters is under pressure to reverse a two-year slide in profit and shares that prompted his predecessor Peter Sands to resign. The bank, which generates almost all of its revenue in Asia, has felt the brunt of a turmoil sparked by plunging commodity prices and concern that China's economy is slowing more than expected. While Mr Winters has cut the bank's dividend in half to save US$1 billion and pledged to reduce risk-weighted assets by as much as US$30 billion by 2016, some analysts forecast a capital gap of as much as US$10 billion.

Standard Chartered shares fell as much as 3.8 perc ent in London, before closing at 723.30 pence, down 2.7 per cent. They have slumped about 25 per cent this year after losing more than a third of their value over the past two years under MrSands. The stock slipped as much as 1.8 per cent in early Hong Kong trading on Friday.

Mr Winters, a former co-head of JPMorgan Chase & Co.'s investment bank, said in August that the bank won't need to raise capital immediately. The bank will decide whether to tap investors after the Bank of England publishes the results of its stress tests on Dec 1, he said at the time.

This year's test covers seven UK lenders including Standard Chartered, HSBC, Barclays, Lloyds Banking Group, Nationwide Building Society, Royal Bank of Scotland and Santander UK. It sets out a "major external shock" to the banking system, including Chinese growth slowing "materially" and plunging commodity prices.

Credit Suisse, Switzerland's second-largest bank, said earlier this month that it will raise 6.05 billion Swiss francs (S$8.56 billion) by selling 1.35 billion francs of stock to select shareholders and 4.7 billion francs of shares to existing investors as regulators prepare tougher capital rules.

Standard Chartered is scheduled to release quarterly earnings on Nov 3.