Standard Chartered Plc (STAN), Britain’s second-largest bank by market value, said it expects to pay about $330 million to settle regulators’ claims that transactions with Iranian clients violated U.S. sanctions.
Talks with U.S. authorities may conclude before the end of the year, Finance Director Richard Meddings said today on a call with journalists. After agreeing to pay $340 million to the New York Department of Financial Services on Aug. 14, the bank is still negotiating with the U.S. Justice Department, the Treasury Department, the Federal Reserve and the Manhattan District Attorney’s office, the lender said in a statement.
“Although this charge is clearly large, it needs to be put into the context of a company that is expected to generate about $7.5 billion of pretax profit in the current year,” said Gary Greenwood, a banking analyst at Shore Capital Ltd. in Liverpool. “It should now draw a line under the issue, while there appears to have been no material damage to the franchise.”
Standard Chartered in August was accused by Benjamin Lawsky, head of the DFS, of helping Iran launder about $250 billion in violation of federal laws, keeping false records and handling lucrative wire transfers for Iranian clients. The settlement was the largest ever paid to an individual regulator as part of a money-laundering accord.
Shares (2888) in the bank rose 0.5 percent to 1,495.5 pence by 8:05 a.m. in London. The stock has gained 6.3 percent this year.
Standard Chartered, which gets most of its profit in Asia, is expected to report full-year revenue growth in the “high single digits,” according to the statement. Meddings said Oct. 30 that the bank might miss its earlier growth target of at least 10 percent.
Pretax income may grow at a “mid single digit” rate, not including the effect of future settlements with U.S. regulators, according to the statement.
The “headwind” from currency moves is decreasing, Standard Chartered, which is seeking a ninth consecutive year of record net income, said in the statement. The bank in October said revenue growth in the first nine months had been “impacted by the strength of the U.S. dollar against Asian currencies.”
Full-year revenue in markets including Africa, Malaysia, China and Indonesia may grow 10 percent or more, the bank said. The lender continues to see “significant opportunities” in Asia, Africa and the Middle East, Chief Executive Officer Peter Sands said in the statement.
Standard Chartered said it continues to expand branch networks and hire in China and Africa, and may increase headcount by 1,800 by the end of 2012 from a year earlier. The bank had 86,865 employees at the end of last year, according to its annual report.
“Standard Chartered is beautifully positioned in emerging markets and will benefit from the relatively better growth in those markets,” Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia Ltd., said in an e-mail today. “The bank is hiring rather than firing. Few global banks can say the same.”
HSBC Holdings Plc (5), Europe’s biggest bank by market value, said on Nov. 5 it’s likely to face criminal charges from U.S. anti-money-laundering probes and that the cost of a settlement may “significantly” exceed the $1.5 billion the bank has already set aside. The bank has been in talks with U.S. regulators over allegations it laundered funds of sanctioned nations including Iran and Sudan.
The settlement may reach $1.8 billion, Reuters reported today, citing people familiar with the matter.
ING Bank NV agreed in June to pay $619 million to settle allegations similar to those against Standard Chartered, a sum that was split evenly between the federal government and the Manhattan District Attorney’s office.
Standard Chartered “is getting away cheap compared to HSBC,” Antos said. “The fact that the bank mentions an exact figure suggests that this has been wrapped up.”
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