Standard Chartered prepares $3bn rights issue

Standard Chartered prepares $3bn rights issue


Standard Chartered is planning a $3bn rights issue to boost the emerging markets bank’s capital reserves and ease investors’ concerns about its ability to weather a severe economic downturn.

StanChart was on Sunday night finalising details of the issue, which is expected to be priced at about 400p per share – a large discount to its current share price, which closed on Friday at 759.5p. Barring any last-minute hitches, an announcement is expected on Monday.

EDITOR’S CHOICE
Cazenove sells Asian unit to StanChart - Nov-14The rights issue, which is expected to be fully underwritten, will make StanChart the latest European bank to raise fresh capital despite insisting that it had no need to do so. Earlier this month Santander, the Spanish bank, surprised investors by unveiling plans to raise €7bn ($8.8bn) through a rights issue.

StanChart, which has minimal exposure to developed markets in Europe and the US, has weathered the credit crunch in better shape than most of its rivals.

Last month, after the UK government announced plans to inject up to £37bn ($55bn) into three of the country’s largest lenders, StanChart declared that its capital levels met regulators’ requirements. But as the economic slowdown has spread around the globe, analysts and investors have begun to question whether the bank had sufficient reserves.

At the end of June, StanChart’s tier one capital ratio, a measure of balance sheet strength, stood at 8.5 per cent.

StanChart declined to comment. StanChart’s rights issue will give all its existing shareholders the opportunity to take part in the offering.

This is a stark contrast with the recent move by Barclays, a rival UK lender, which turned to investors in the Middle East for the majority of its £7bn capital increase, denying existing shareholders the chance to participate.

Barclays executives are today expected to face a stormy reception from shareholders who are being asked to approve the deal at an extraordinary general meeting. StanChart’s move will also provide a test of the willingness of UK institutional investors to support capital raising by large financial institutions.

In recent months investors have shunned offerings by HBOS, the UK mortgage lender, and Bradford & Bingley, the former building society.

StanChart already has the authority to issue up to a third of its share capital without seeking approval from shareholders.

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