Standard Chartered shares tumble

August 7, 2012

Shares in Standard Chartered tumbled as much as 20 per cent in morning trading after the New York State financial regulator accused the UK merchant bank of hiding $250bn of transactions with the Iranian government.

The New York state Department of Financial Service claimed on Monday that the bank had concealed about 60,000 transactions with Iranian clients from US regulators, violating sanctions against the Iranian government, and labelled the UK bank a “rogue institution”.

StanChart’s shares dived on fears that the bank could lose its clearing licence for US dollars, which could wipe 30-40 per cent off the group’s earnings, according to analysts at Sanford C Bernstein.

“If you lose your US dollar clearing permission, you cannot be a wholesale bank in Asia. If you lose that licence, you cannot be a trade bank,” said Chirantan Barua, an analyst at Sanford C Bernstein.

Other analysts thought it unlikely that StanChart would be stripped of its clearing licence. “It’s difficult to think that the bank could lose its licence, but you can’t rule it out,” said Chintan Joshi, at Nomura, which downgraded the bank from “buy” to “neutral” on Monday night.

StanChart, led by chief executive Peter Sands, issued a trenchant rebuttal to the US regulator, claiming that the DFS did not present “a full and accurate picture of the facts”.

The statement said: “As we have disclosed to the authorities, well over 99.9 per cent of the transactions relating to Iran complied with the U-turn regulations [which enable non-US countries to trade with Iran using dollars]. The total value of transactions which did not follow the U-turn was under $14m.”

The drop in its London share price accelerated losses on Standard Chartered’s dual listing in Hong Kong, with the group’s fall more than doubling after the London open.

A spokesman for the Hong Kong Monetary Authority, the Chinese territory’s banking regulator, said it was “reviewing the order concerning the Standard Chartered Bank issued by the New York State Department of Financial Services, to see if there are issues that have relevant implications for Hong Kong”.

The Financial Services Authority in London could not be reached for comment.

Shares in the group were down 16 per cent at £12.31 just before 9am.

By Duncan Robinson
Financial Times