Standard Chartered rights issue points to growing boardroom rift
This article by Margareta Pagana for The Independent dated December 7th may be of interest to subscribers. Here is a section:
Last night, a spokesman for the bank said it was ¡°extremely comfortable with its capital levels and remains in a strong position¡±. He added: ¡°Some analysts have speculated about a rights issue after the trading statement but we do not comment on such speculation.¡± Richard Meddings, the group finance director, also said on Wednesday that the bank was comfortable with its capital ratios. However, the spokesman was not able to comment on whether other board members took a different view.
Standard Chartered has enjoyed 10 consecutive years of growth in revenues and profits. However, the past year or so has been tough. Problems at its South Korean subsidiary caused the bank to expect at least a 10 per cent fall in operating profits in consumer banking, and an operating loss of $200m at the South Korean unit. In August, it took a $1bn write-down at the unit after other lenders in the country were forced to write off personal loans.
Profits in wholesale banking are expected to be flat for the year, with group revenues likely to be little changed from last year¡¯s ¡ê11.6bn. A long-standing target of generating double-digit revenue growth every year has been dropped.
The UK’s banking sector has a long history of internationalisation not least in Asia. Standard Chartered was classically regarded as a Hong Kong institution and has spent much of the last decade expanding across Asia and Africa. HSBC is one of the world’s most globally oriented banks while Barclays’s acquisition of ABSA Bank in South Africa highlights where its growth ambitions lie. The fact that Bank of Georgia chose the LSE for its listing also highlights the success of the exchange in attracting business. Therefore the FTSE-350 Banks Index might be considered representative of more than simply the health of the UK economy. However, since the City plays such an important role in the wider economy it cannot be ignored.
Standard Chartered and HSBC’s recent declines have weighed on the sector which broke its short-term progression of higher reaction lows last week to fall below the 200-day MA for the first time since July. A clear upward dynamic will be required to check the slide and suggest a return to demand dominance.
The FTSE-100 Index continues to pause in the region of historic peaks and has pulled back to test the region of the 200-day MA near 6500. It will need to continue to hold in this area if the progression of higher reaction lows within the six month range is to hold.
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