Standard Chartered shares plunge most in 24 years

BANK MAY LOSE ITS NEW YORK LICENCE FOR ALLEGEDLY VIOLATING MONEY LAUNDERING LAWS

Standard Chartered Plc fell the most in almost 24 years as an analyst estimated it may face costs of $5.5 billion (Dh20.2 billion) after being accused of violating US money laundering laws over its dealings with Iranian banks.

The shares fell 23 per cent to 1,132 pence in London trading, their biggest decline since 1988, the earliest date for which data are available.

Standard Chartered may lose its licence to operate in New York after the state’s Department of Financial Services found the bank conducted $250 billion of deals with Iranian banks over seven years and earned hundreds of millions of dollars in fees for handling transactions for institutions subject to US economic sanctions.

The London-based lender yesterday denied the allegations, saying it “strongly rejects the position and portrayal of facts” made by the regulator.

The bank may be fined $1.5 billion by US regulators, lose about $1 billion of revenue from its Iranian operation, and a further $3 billion in market value if senior managers quit, Cormac Leech, an analyst at Londonbased Liberum Capital Ltd. who rates the stock a buy, wrote in a note to investors yesterday.

“It’s unclear whether senior management will resign for the alleged shortcomings given that they have been in their current roles for much of the relevant period, raising the risk of kitchen-sinking on arrival of new management,” Leech said.

The stock had risen 11 per cent this year before Monday, making it the third-best performing British bank stock after Lloyds Banking Group Plc and HSBC Holdings Plc. The shares are now down almost 20 per cent for 2012, paring the lender’s market value to about £27 billion (Dh155.3 billion).

While Standard Chartered doesn’t have any domestic US banking operations, the loss of the New York licence would hinder its ability to pro- cess dollar payments for clients with businesses in the US and in emerging markets, Gary Greenwood, an analyst at Shore Capital in Liverpool, said. Pretax profit from Standard Chartered’s US, UK, and European units increased 90 per cent in the first half to about $464 million — about 12 per cent of the bank’s total.

“A loss of its US banking licence would not only jeopardise part of this profit stream, but the associated reputational damage could also have a severely damaging impact to its operations within emerging markets,” Greenwood said. He added that it’s unlikely the bank will lose the licence.