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SCMP Reporter

Bank aims to add capital to help it ride out turbulent period
London-based Standard Chartered plans to raise a net GBP1.779 billion (HK$20.67 billion) from a share rights issue, moving to boost its capital amid the global financial turmoil.
Richard Meddings, the bank's group finance director, said the lender was well capitalised but 'we are mindful, amid a turbulent period, that investors are looking for banks to hold more capital'.
Those holding pound-denominated stock can buy 30 new shares for every 91 held for GBP3.90 a share, a 48.65 per cent discount to the closing price in London last Friday.
The issuing price for Hong Kong shares is HK$45.11, or a discount of 48.74 per cent to the HK$88 they were trading at before being suspended yesterday in Hong Kong.
Mr Meddings said the fund raising could give the Asian-focused bank more of a 'buffer during the extraordinary times' facing markets.
The markets the bank operated in were less affected than the developed markets but were not immune to the turmoil.
Standard Chartered said Temasek Holdings, the investment arm of the Singapore government, which holds about 19 per cent of the bank, intended to take up its rights. It was also participating in underwriting the issue, to a total of 33 per cent of the new  shares if other investors did not take up their rights.
The bank said its dividend policy was unchanged and it planned to distribute by way of final dividend this financial year the same amount it would have done had the rights issue not been implemented.
Kenny Tang Sing-hing, the head of research  at Redford Securities, said Standard Chartered's share price was likely to be affected, as the issue was being  offered at a big discount to the current share price. 'The  rights issue could indicate the bank is worried that  its provisions in emerging markets will rise sharply and they need to prepare more capital,' he said.
Shares of Standard Chartered in London fell 4.87 per cent to GBP7.225 in late afternoon trade.
Group chief executive Peter Sands reiterated that the bank's financial position was strong, as it continued to deliver record profits to the end of  last month,  mainly driven by the wholesale banking business.
Mr Sands said the bank was 'well positioned to continue to weather the economic uncertainties and to take advantage of opportunities as they emerge'.
He admitted the credit crunch was having an increasing impact on markets where the bank operated, but economic growth prospects in most regions remained much higher than in the west.
The bank expected next year  to be challenging, and loan impairment charges were likely to rise.
The second half of the year had seen significant volatility in currency movements, which  had a negative impact on the group's net assets. The most significant  were   in the  won.
'A movement [up or down] of 50 won changes the group's net assets by approximately US$185 million,' the bank said.
It said US$8.3 billion of illiquid assets had been redesignated from held for trading and available for sale, to available for sale and loans and receivables. If such a redesignation had not been made, pre-tax profit would have been cut by US$200 million.
Meanwhile,    troubled equity markets had placed downward pressure on the valuation of certain stock investments, with the downward valuation  totalling about  US$300 million at the end of  last month.
The bank also said the carrying value of  its asset-backed securities fell to US$3.97 billion  last month from US$4.96 billion at the end of June.  As a result, it had made impairment charges of  US$153 million to its profit and loss account.



StanChart rights issue taps market for GBP1.78b