5th Nov 2015 12:36
LONDON (Alliance News) - Fitch Ratings, a credit rating agency, on Thursday downgraded Standard Chartered PLC, citing "unfavourable profitability and asset quality trends" and the Asia-focused bank's weak performance relative to peers.
The downgrade comes two days after Standard Chartered said it wants to raise GBP3.3 billion from shareholders and scrap its final dividend, cut 15,000 jobs and restructure billions of dollars in risk-weighted assets.
The ratings agency cut Standard Chartered's long-term issuer default rating to A+ from AA-, and reiterated its negative outlook on the bank.
Fitch said that Standard Chartered's proposed restructuring measures "address several aspects" the ratings agency had previously highlighted as potential negative rating factors.
However, Fitch said its view is that Standard Chartered remains vulnerable to volatility from a difficult operating and regulatory environment.
Fitch maintained its negative outlook as it said the bank's implementation of the restructuring plan "could be challenged by headwinds from further downturn in the credit cycle as well as high management and staff turnover".
The ratings agency said there is potential for further downgrades "if the bank fails to strengthen earnings and reduce risks or if loan quality deterioration accelerated undermining its capital strength. Outsized fines or material business restrictions from litigation could also lead to a downgrade".
That said, Fitch's outlook on Standard Chartered would be revised to stable if the bank "demonstrates that it can implement the new strategy successfully resulting in a leaner organisation that draws franchise strength from its global network and from profitable domestic operations".
Shares in Standard Chartered were down 4.7% at 637.80 pence on Thursday shortly after midday.
By Samuel Agini; [email protected]; @samuelagini
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