3rd Nov 2015 05:52
LONDON (Alliance News) - Standard Chartered PLC on Tuesday said it will raise GBP3.3 billion in a rights issue and axe its final dividend for 2015 to strengthen its balance sheet, as the Asia-focused bank reported that it swung to a third-quarter loss on a jump in impairment charges for bad loans.
The potential for an equity fundraising had been raised by Standard Chartered itself. The bank, which makes most of its money in Asia, Africa and the Middle East, has been nursing the wounds of a two-year profit slide, exposure to commodities at a time of low pricing, and weak investor sentiment towards emerging markets.
The two-for-seven rights issue is designed to increase the group's common equity tier one capital ratio, a key measure of financial strength, to 13.1% on June 30 levels from 11.5%. The issue price of 465 pence is a 34.8% discount to the Monday's closing price of 713.6p. The rights issue is fully underwritten. The bank said that Temasek Holdings, its largest shareholder, will take up its rights for 15.8% of existing share capital.
The news came as Chief Executive Bill Winters revealed the outcome of a strategic review that will aim to shift the group's focus to affluent retail clients and less on asset intensive corporate and institutional banking businesses.
Standard Chartered's decision to opt against paying a final dividend means the total payment for 2015 will be the 14.4 US cents declared with its half-year results. The bank intends to return to dividends in respect of the 2016 financial year.
Standard Chartered said it swung to a USD139 million pretax loss in the three months to September 30, from a USD1.53 billion pretax profit in the corresponding quarter the prior year.
Third-quarter operating income was down 18% to USD3.68 billion. Operating expenses were down 3.3% to USD2.24 billion.
Impairment losses on loans and advances and other credit risk provisions swelled to USD1.23 billion from USD536 million due to exposure to commodities and to India. Other impairment of USD161 million was due to "write-downs of certain strategic investments which were impacted by market conditions in the period".
The latest quarterly figures mean that Standard Chartered's pretax profit for the first nine months of 2015 was down 65% year-on-year to USD1.69 billion.
CEO Winters, who took charge on June 10, had already cut Standard Chartered's interim dividend by half and continued to reduce the bank's risk-weighted assets to improve financial strength.
"We are assertively managing costs to create investment capacity, reallocating capital to improve returns, and improving the group?s risk profile. This comprehensive programme of actions will result in a lean, focused and well capitalised international bank, poised for growth across our dynamic and growing markets in Asia, Africa and the Middle East," Winters said in a statement on Monday.
By Samuel Agini; [email protected]; @samuelagini
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