Standard Chartered may avoid making capital increases
Standard Chartered may be able to avoid a capital increase, despite the ongoing Asian economic turmoil, according to Barclays' analysts, who noted that "given the strong capital progression to an 11.5% common equity Tier 1 in the first half of the year, a capital raise is not our base case. We believe that the CET1 ratio can remain above 10% in our stress scenario, leaving some scope for a deterioration in risk weightings or a worse operating performance". It has also been pointed out that Standard Chartered has proven in the past to be fairly resilient in an Asian crisis, due to its "robust performance from their Hong Kong businesses".&nbsp;
Standard Chartered Plc (LON:STAN) might not need to raise capital despite the ongoing turmoil hurting its key Asian markets, analysts at Barclays Plc (LON:BARC) said last week.



The bank is going through a rough period, trying to reverse a two-year decline in profits and a plunge in its share price. The company’s position has become even more challenging in recent months, after growing fears that China’s economy is slowing down more than expected prompted a stock market crash in the country. China is Standard Chartered’s main market and given the challenging environment, some analysts have expected that firm may have to raise additional capital from investors, but according to Barclays, the bank may be able to avoid such a scenario.



“Given the strong capital progression to an 11.5 percent common equity Tier 1 ratio in the first half of the year, a capital raise is not our base case,” a Barclays team of analysts led by Rohith Chandra-Rajan, wrote in a note, as quoted by Bloomberg. “We believe that the CET1 ratio can remain above 10 percent in our stress scenario, leaving some scope for a deterioration in risk weightings or a worse operating performance.” Chandra-Rajan also pointed out that Stanchart and its larger Asian-focused peer HSBC Holdings, had proven to be fairly resilient in the Asian crisis of the late 1990’s “thanks to a robust performance from their Hong Kong businesses”.

The analysts noted that there is currently an opportunity to buy Standard Chartered, with its shares having fallen more than 25 percent since the start of the year and sitting near a historic low of 30 percent to book value. The discount to book value indicates that the bank is worth less than what investors should expect to receive if the company failed and liquidated its assets. Chandra-Rajan has an “overweight” rating on the shares.

In today’s trading, Standard Chartered shares were up 0.4 percent at 718.90p, as of 11:42 BST. The stock has fallen 25.3 percent since the start of the year and the company’s market capitalisation currently stands at £18.3 billion.

As of September 11, 2015, the consensus forecast amongst 27 polled investment analysts covering Standard Chartered PLC advises investors to hold their position in the company. The same consensus estimate has been maintained since May 08, 2013, when the sentiment of investment analysts deteriorated from “outperform”.

As of 14:09 BST, Monday, 14 September, Standard Chartered PLC share price is 711.90p.

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