StanChart to take US$900m charge over US and UK regulatory probes

New York

STANDARD Chartered will take a US$900 million charge tied to regulatory probes in its fourth-quarter results, a move that will erode earnings as its top executive prepares to unveil a turnaround plan.

The provision will cover the UK bank's estimates for potential penalties from investigations over US sanctions violations, currency trading issues and financial-crime controls, the company said late on Wednesday. The bank has been bracing itself for a possible US fine related to past dealings with Iran, and the charge may indicate a settlement is close.

Chief executive officer Bill Winters is due to present his plan to improve profitability when the bank reports its full-year results on Tuesday. He may also announce a new round of cost cuts to boost a share price that has fallen by more than 35 per cent since he took over in June 2015.

The provision could wipe out the majority of the bank's second-half profit. Joseph Dickerson, an analyst at Jefferies Financial Group Inc, said in a note this week that he estimated the firm would post pre-tax profit of US$1.4 billion in the last six months of 2018, excluding litigation costs.

Shares of Standard Chartered slipped 0.2 per cent as at 10.37am in Hong Kong. The stock is up about 7 per cent this year, after having fallen 27 per cent last year.

Other global banks are grappling with soaring legal expenses. A French court on Wednesday ordered UBS Group to pay more than US$5 billion over a tax-evasion case, the biggest fine for a Swiss bank. UBS said it will appeal; the penalties make up more than its entire profit for 2018.

Standard Chartered settled a currency trading investigation last month and said it received a notice from the UK's Financial Conduct Authority (FCA) over the financial-crime controls. The FCA plans to impose a penalty of £102 million (S$179.7 million), the London-based lender said. The bank said it's still considering its options related to the FCA's notice.

In the US, the authorities have been monitoring Standard Chartered since 2012, when the lender paid US$667 million and entered into a deferred-prosecution agreement to resolve allegations that it illegally processed transactions with Iranian parties.

The Justice Department has since extended the agreement multiple times, most recently in December, after saying the bank may have failed to disclose additional violations.

In October, Bloomberg News reported that Standard Chartered was expecting to pay a penalty of around US$1.5 billion for allowing customers to break Iran sanctions. Fines of that scale wouldn't materially derail the bank's ability to return capital to shareholders via dividends, Bloomberg Intelligence analysts said last month. BLOOMBERG.