Standard Chartered to raise $5.3bn to strengthen books

STANDARD Chartered, the Asia-focused British bank, yesterday announced a $5.3 billion (£3.3bn) rights issue to fund further growth and strengthen its balance sheet ahead of new capital rules.

The London-headquartered bank, which derives at least 75 per cent of its profits in Asia, said the forthcoming Basel III rules threatened to restrict its asset growth even though it made record profits in the first nine months of the year.

Standard Chartered's chief executive, Peter Sands, said: "It's to safeguard the bank's ability to grow, to take advantage of the opportunities in our markets while also meeting the anticipated changes in the regulatory world."

The bank has signalled its intention to take advantage of further opportunities "across Asia, Africa and the Middle East" but Sands insisted the cash call was not designed to fund a large deal as rumoured.

There has been speculation around the firm eyeing a significant deal in South Africa but Sands said: "This is not a war chest for acquisitions."

The Basel III rules announced last month tightened the definition of capital and introduced a greater risk weighting on many assets, meaning that most banks will have to reassess their capital ratios - the measure used to test an institution's strength.

Analysts said yesterday's announcement suggested that the UK regulator may be pushing British banks to meet Basel III ahead of other countries and was applying even more stringent standards.

Joseph Dickerson, an analyst at Execution, said: "Clearly the message is that the UK regulator may be accelerating the Basel III implementation timetable."

The rights issue, which is expected to be well supported by Standard Chartered shareholders, will raise the bank's core tier one capital ratio to about 11 per cent from 9 per cent at the end of June. But Basel III definitions are expected to reduce this to about 10 per cent.

Analysts believe that a number of banks will seek to steal a march on the rest of the market by raising enough capital to meet the rules before their gradual introduction by 2019.

This could put pressure on others to follow suit, and those last to make the decision may have to accept tighter terms in a crowded market.

A number of institutions were yesterday tipped to follow suit including Allied Irish Banks, France's Credit Agricole and Societe Generale and Germany's Commerzbank.

Daniel Tabbush, an analyst at CSLA, said: "Basel regulations will be difficult for some western banks and they want to jump ahead of the line in raising capital before some of the European banks do that."

Standard Chartered investors will be offered one new share for every eight shares at a price of 1,280p - a 33 per cent discount to Tuesday's closing price.First-half profits at Standard Chartered hit $3.1bn while it said yesterday that income in the third quarter outpaced that of the first six months of the year, bringing trading almost level to pre-banking crisis levels.

Shares in the bank closed down 32.5p at 1,876p.

BIG, NOT HUGE:

STANDARD Chartered's rights issues is the third largest this year and follows hot on the heels of a similar fundraising exercise by Deutsche Bank.

The German lender raised more than 6 billion earlier this month - partly to bolster its capital reserves. Other institutions are tipped to follow suit. Italy's Unicredit has also turned to the markets for cash this year.

But the sums tapped in 2010 are dwarfed by those raised previously by Lloyds Banking Group, HSBC and Royal Bank of Scotland.