US regulator’s licence threat worries investors

NEW YORK: The threat by a New York regulator to suspend Standard Chartered Plc’s banking license is stoking investor and analyst concern the business model that produced eight straight years of record profit is in jeopardy.

The shares had slumped 22% in London since the Aug 6 order, erasing £8bil of market value.

“If a global bank loses its US presence, that’s quite hobbling in terms of conducting international dollar transactions,” said Serena Moe, a former US Treasury Department deputy chief counsel and Citigroup Inc lawyer who’s now at law firm Wiley Rein LLP in Washington.

The stock was downgraded by analysts at Nomura Holdings Inc and Bank of America Corp this week on concern the allegations regarding the Iranian transactions may weigh on the shares and lead to more probes.

“The whole business model comes under scrutiny, given that Standard Chartered is basically a trading bank in Asia where the bulk of the trade is in US dollars,” said Chirantan Barua, an analyst at Sanford Bernstein Research in London. Barua has had an underperform rating on the stock since at least March, according to data compiled by Bloomberg.

The lender was unlikely to lose its banking licence because the regulator’s order focused on monetary penalties, Cormac Leech, an analyst at London-based Liberum Capital Ltd who rates the stock a buy, wrote in a note to clients on Tuesday.

“It’s incredibly difficult to know what kind of impact this is going to have on Standard Chartered’s business,” said James Chappell, an analyst at Germany’s Berenberg Bank. “That uncertainty is why the shares have been hit as much as they have.”

The Hong Kong Monetary Authority is reviewing the New York order to see if there are issues that have implications for the city, according to an e-mailed statement in response to queries yesterday. — Bloomberg