UK bank surprises in rights issue plan
By Robert Barr |
October 14, 2010, Thursday
|
Print Edition
Print Edition
STANDARD Chartered Plc surprised the market yesterday by asking its shareholders for 3.3 billion pounds (US$5.2 billion) in a rights issue to meet tighter global capital requirements.
The British bank said it needs to be sure it has cash available for expansion after meeting the Basel III rules, which are expected to raise the amount of money banks need to set aside as a buffer against potential problems.
Along with the announcement, the bank also reported a "very strong" third quarter with business volume nearly back to pre-credit crisis levels.
"We see many opportunities for growth across Asia, Africa and the Middle East as the world continues to rebalance between East and West," said Chief Executive Peter Sands.
"We are launching this rights issue to ensure that we can continue our strong record of organic growth and take full advantage of these opportunities, while at the same time being prepared for likely increases in capital requirements resulting from Basel III implementation."
The bank is offering one new ordinary share at 1,280 pence for every eight existing shares.
"Accelerated growth is (we believe) already in market expectations, whereas the scale of this further increase in (dilutive) capital buffers is not," wrote Ian Gordon, a BNP Exane Paribas analyst.
Gordon said that "our concerns were and remain around returns where, with ongoing margin pressures (on both sides of the balance sheet), and a bloated capital base, we see little prospect of returns on equity exceeding 15 percent in 2011/12."
The British bank said it needs to be sure it has cash available for expansion after meeting the Basel III rules, which are expected to raise the amount of money banks need to set aside as a buffer against potential problems.
Along with the announcement, the bank also reported a "very strong" third quarter with business volume nearly back to pre-credit crisis levels.
"We see many opportunities for growth across Asia, Africa and the Middle East as the world continues to rebalance between East and West," said Chief Executive Peter Sands.
"We are launching this rights issue to ensure that we can continue our strong record of organic growth and take full advantage of these opportunities, while at the same time being prepared for likely increases in capital requirements resulting from Basel III implementation."
The bank is offering one new ordinary share at 1,280 pence for every eight existing shares.
"Accelerated growth is (we believe) already in market expectations, whereas the scale of this further increase in (dilutive) capital buffers is not," wrote Ian Gordon, a BNP Exane Paribas analyst.
Gordon said that "our concerns were and remain around returns where, with ongoing margin pressures (on both sides of the balance sheet), and a bloated capital base, we see little prospect of returns on equity exceeding 15 percent in 2011/12."
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