Standard Chartered Bank

Standard Chartered delays launch of US$5.1 billion rights issue

Bank says it is deferring the issue by a week to next Wednesday

PUBLISHED : Tuesday, 10 November, 2015, 11:24am
UPDATED : Wednesday, 11 November, 2015, 12:59am

Standard Chartered Bank is deferring its US$5.1 billion rights issue by five days to November 18, it said in a filing to the Hong Kong Stock Exchange on Tuesday.

StanChart needs the issue to go through in order to finance the restructuring plan chief executive Bill Winters announced last week, and to bolster its capital adequacy ratio.

The bank is targeting to raise enough funds so its common equity tier-one (CET1) ratio can be raised to 13 per cent from the current 11.4 per cent. It has just received fresh notice from the Financial Stability Board that it has until 2022 to raise its total loss-absorbing capacity to 18 per cent of its assets.

“This is surprising. Maybe they didn’t have all their legal filings or other information organised in time,” said Jim Antos, Hong Kong-based banking analyst at Mizuho Securities.

“It might be the investment bank’s issue – it might be StanChart’s issue. [There is] no way to know. Maybe they can’t get their prospectus out fast enough for some simple practical reason. I guess there is nothing nefarious here. There is always hedge language about the timing of capital issues, so theoretically this is within the scope of what is normal.”

The deal is expected to be fully underwritten by JP Morgan and BoA Merrill Lynch, with Singapore sovereign fund Temasek, StanChart’s largest shareholder, taking up a key stake.

Neither JPMorgan nor BOA Merrill Lynch responded to the enquiries on the reason for the delay as of press time.

Antos said he thought it is unlikely that key investors exiting the deal could have caused the deferral.

“The good news is that if you wanted to trade into the shares to take advantage of the deep discounted price, you now have until November 16.”

Winters surprised markets last week by posting a US$139 million loss instead of the profit the market had expected for the first nine months of the year. Analysts were also alarmed by the kind of revenues that StanChart’s businesses are pulling in and its performance across all client segments.

Investor reaction to StanChart results has been sharp. Since Winters announced he intends to cut 15,000 positions and turn StanChart into a more retail-focused bank, its stock has dropped by 15.01 per cent in London. The FTSE 100 index has edged down 0.51 per cent in the same period.

In Hong Kong, which is still a focus growth market for the bank, the stock is down 10 per cent. The Hang Seng Index has gained 7 per cent over the same period.

Winters also said corporate accounts will need to ”upgrade” themselves to acceptable profitability, failing which StanChart would exit from the current relationships. Corporate and institutional clients contribute some 57 per cent of revenue to StanChart’s bottom line.

Fitch Ratings has downgraded the bank’s Long-term Issuer Default Ratings (IDRs) to “A+” from “AA-”, citing its “unfavourable profitability and asset quality trends” compared to peers.

Moody’s has also downgraded StanChart’s long-term deposit rating to Aa2.

The previously announced dates for the rights issue will be moved following StanChart’s latest announcement.

“As a consequence of this change, the last day of dealings in Existing Ordinary Shares on a cum-rights basis in Hong Kong is now expected to be 16 November 2015 and not 11 November 2015 as previously stated; Existing Ordinary Shares are now expected to be marked “ex-rights” by the Hong Kong Stock Exchange on 17 November 2015 and not on 12 November 2015 as previously stated,” Standard Chartered said in its statement.

“The latest date for which transfers of Existing Ordinary Shares are to be accepted for registration on the Hong Kong register for participation in the Rights Issue is now expected to be 18 November 2015 and not 13 November 2015 as previously stated.”