Banking giant Standard Chartered is facing a further $330 million (£205m) bill to settle a case with US regulators who accused the Asia-focused group of failing to comply with sanctions against Iran.
The settlement, which is expected to be agreed within weeks, would be on top of the $340m it paid earlier this year to a New York watchdog that branded the bank a “rogue institution” amid claims it exposed the US to terrorists, drug barons and weapons dealers.
Standard Chartered said it remained in “active and constructive discussions” with agencies including the US justice department and New York Federal Reserve, and the talks are “likely to result in the group paying a sum of approximately $330m”.
Shore Capital analyst Gary Greenwood said: “Although this charge is clearly large, it needs to be put into the context of a company that is expected to generate around $7.5 billion of pre-tax profit in the current year, before settlement costs.
“The important points to make are that it should now draw a line under the issue while there appears to have been no material damage to the franchise as a result of this.”
In August, Standard Chartered agreed to pay $340m to a New York regulator to settle accusations that it hid illegal transactions with Iran and violated US sanctions law. The New York State department of financial services (DFS) accused the group of keeping about 60,000 transactions secret from US agencies over a period of nearly ten years.
Cenkos Securities analyst Sandy Chen said the total $670m bill was “a touch smaller” than the $730m he had pencilled in, and pointed out that Standard Chartered has not been exposed to Libor and payment protection insurance (PPI) charges that have burdened other UK banks.
Chen added: “It’s worth noting again that Standard Chartered’s solid combination of growth and profitability is exceedingly rare, especially amongst UK-listed banks – and don’t forget the 4 per cent dividend yield.”
Standard Chartered said the settlement with the New York DFS would knock earnings growth this year, with pre-tax profits expected to rise at a “mid single digit rate”. Excluding those costs, earnings are likely to show double digit percentage growth, with analysts at Investec forecasting a 12 per cent increase in underlying pre-tax profits to around $7.6bn.
Chief executive Peter Sands said: “We continue to see significant opportunities across our markets in Asia, Africa and the Middle East.”
Meanwhile, rival Barclays is to merge most of its African operations with its Johannesburg-based subsidiary Absa in a deal that values Barclays Africa at £1.3bn. The combined business, in which Barclays will hold a 62.3 per cent stake, will have about 14.4 million customers and more than 1,300 branches.