Standard Chartered PLC announced a rights issue to raise £1.8 billion in a move to bolster its balance sheet as economic growth in its key markets is slowing, but said in a separate trading statement ahead of its full-year results that it remains well capitalised and highly liquid.
Its biggest shareholder with 19 percent, Singapore’s Temasek, is supporting the rights issue and plans to take up its share of it, and will also join JP Morgan Securities Ltd, UBS Ltd and Goldman Sachs International as underwriters of the issue.
Standard Chartered will issue 30 new shares for every 91 shares held, priced at 390 pence per share, a discount of 48.7 percent to the closing price on November 21 2008.
Economic growth within the key core markets of Asia, Africa and the Middle East is clearly slowing down largely as a consequence of the global financial crisis and the sharp economic slowdown in the West, the company said. In general, however, their economic and financial fundamentals are resilient and their near term economic growth rates appear likely to remain well above those of markets in the West.
“Following the rights issue, the group will be in an even better position to weather the economic uncertainties and take advantage of the opportunities emerging from the current turmoil in financial services,”, it said, adding the primary focus will be organic growth opportunities, but there may also be acquisition opportunities.
Regarding current trading, Standard Chartered said has good income momentum, although slower than in the first half of 2008, with record profits to the end of October.
Income growth remains strong, driven by continued strong performance in the Wholesale Banking division across a wide range of products and customer segments. Consumer Banking revenue growth has slowed in the second half, with the run-rate of Wealth Management income below the levels seen in the first half of the year, and is continuing to slow.
“The group remains strongly liquid and we have continued to see a good inflow of deposits, resulting in a loan to deposit ratio materially below 100 percent. We continue to be a provider of liquidity to the interbank money market,” it said.