Standard Chartered Discloses New York Inquiry as Pretax Profit Falls
By CHAD BRAY
AUGUST 6, 2014 5:24 AM August 6, 2014 8:50 am
A branch of the British bank Standard Chartered in Hong Kong.Credit Alex Ogle/Agence France-Presse — Getty Images
LONDON — Standard Chartered confirmed on Wednesday that it was facing an inquiry by New York State authorities over its monitoring of potentially risky transactions and reported that its pretax profit in the first half of the year fell 20 percent.
The bank, which is based in London, but which earns most of its profit in Asia, disclosed the inquiry by the New York State Department of Financial Services over the bank’s controls to prevent money laundering and said that any remedies could include an extension of a two-year review period by a corporate monitor.
The settlement talks with the regulator, reported by The New York Times on Tuesday, come two years after the bank agreed to pay a combined $667 million to settle with the state and federal authorities in the United States related to accusations that it illegally handled hundreds of billions of dollars in transactions for individuals and companies with ties to Iran.
In a news release, Standard Chartered said that it was engaged in “discussions” with New York State authorities regarding its post-transaction surveillance system, which helps monitor potential instances of money laundering.
“The group believes that the resolution of these issues is likely to involve an enforcement action by the NYSDFS that would include an extension of the term of the monitor beyond the original two-year term, a monetary penalty and remedial actions,” the company said.
Peter Sands, the chief executive of Standard Chartered, added, however, that he did not expect any payout to be as big as the bank’s last settlement in the United States.
“We do not believe the impact to be on the same scale as the very different issues we faced two years ago,” Mr. Sands said on a call with journalists on Wednesday. “We believe the monetary penalty will be less than what we paid in 2012.”
The company’s stock has been under pressure in recent weeks after it warned that its profit would be down sharply in the first half of the year and rumors swirled in the media that the company was preparing a succession plan for Mr. Sands, which the bank denied.
In June, the bank warned that it was facing a 20 percent drop in its first-half results on declines in foreign exchange and interest rate trading because investors had pulled back from those markets.
Shares of Standard Chartered were virtually unchanged in trading in London on Wednesday.
In the first six months of the year, Standard Chartered said that its profit, as attributable to shareholders, rose 8 percent to $2.31 billion. That compared with $2.13 billion in the first half of 2013.
When adjusted for one-time costs, the firm’s pretax profit fell 20 percent to $3.27 billion. The adjusted, pretax profit number is an important measure for analysts.
“Our performance in the first half of 2014 is clearly disappointing,” Mr. Sands said in a news release. “It is not what we strive for and not what our investors expect. In March, we made clear that this first half would be tough, and we were even more specific in our pre-close trading statement in June.”
Standard Chartered said that income in its financial markets business declined 20 percent to $432 million, hurt by lower volumes in its interest rate trading and currencies business. The company also posted a $127 million loss in South Korea, a business it is reshaping.
The bank reported that revenue declined 5 percent to $9.27 billion in the first six months of the year. Net interest income — the measure of what a bank earns on its lending after deducting what it pays out on deposits and other liabilities — rose slightly to $5.6 billion in the first half of the year.
Standard Chartered’s operating expenses declined 1 percent to $5.08 billion, while charges for poorly performing loans and other credit risks rose 16 percent to $846 million, from $730 million in the period a year earlier.
The bank’s common equity Tier 1 capital ratio, a measure of its ability to weather financial disturbances, declined to 10.5 percent at the end of June from 10.9 percent at the end of the year.
By CHAD BRAY
AUGUST 6, 2014 5:24 AM August 6, 2014 8:50 am
A branch of the British bank Standard Chartered in Hong Kong.Credit Alex Ogle/Agence France-Presse — Getty Images
LONDON — Standard Chartered confirmed on Wednesday that it was facing an inquiry by New York State authorities over its monitoring of potentially risky transactions and reported that its pretax profit in the first half of the year fell 20 percent.
The bank, which is based in London, but which earns most of its profit in Asia, disclosed the inquiry by the New York State Department of Financial Services over the bank’s controls to prevent money laundering and said that any remedies could include an extension of a two-year review period by a corporate monitor.
The settlement talks with the regulator, reported by The New York Times on Tuesday, come two years after the bank agreed to pay a combined $667 million to settle with the state and federal authorities in the United States related to accusations that it illegally handled hundreds of billions of dollars in transactions for individuals and companies with ties to Iran.
In a news release, Standard Chartered said that it was engaged in “discussions” with New York State authorities regarding its post-transaction surveillance system, which helps monitor potential instances of money laundering.
“The group believes that the resolution of these issues is likely to involve an enforcement action by the NYSDFS that would include an extension of the term of the monitor beyond the original two-year term, a monetary penalty and remedial actions,” the company said.
Peter Sands, the chief executive of Standard Chartered, added, however, that he did not expect any payout to be as big as the bank’s last settlement in the United States.
“We do not believe the impact to be on the same scale as the very different issues we faced two years ago,” Mr. Sands said on a call with journalists on Wednesday. “We believe the monetary penalty will be less than what we paid in 2012.”
The company’s stock has been under pressure in recent weeks after it warned that its profit would be down sharply in the first half of the year and rumors swirled in the media that the company was preparing a succession plan for Mr. Sands, which the bank denied.
In June, the bank warned that it was facing a 20 percent drop in its first-half results on declines in foreign exchange and interest rate trading because investors had pulled back from those markets.
Shares of Standard Chartered were virtually unchanged in trading in London on Wednesday.
In the first six months of the year, Standard Chartered said that its profit, as attributable to shareholders, rose 8 percent to $2.31 billion. That compared with $2.13 billion in the first half of 2013.
When adjusted for one-time costs, the firm’s pretax profit fell 20 percent to $3.27 billion. The adjusted, pretax profit number is an important measure for analysts.
“Our performance in the first half of 2014 is clearly disappointing,” Mr. Sands said in a news release. “It is not what we strive for and not what our investors expect. In March, we made clear that this first half would be tough, and we were even more specific in our pre-close trading statement in June.”
Standard Chartered said that income in its financial markets business declined 20 percent to $432 million, hurt by lower volumes in its interest rate trading and currencies business. The company also posted a $127 million loss in South Korea, a business it is reshaping.
The bank reported that revenue declined 5 percent to $9.27 billion in the first six months of the year. Net interest income — the measure of what a bank earns on its lending after deducting what it pays out on deposits and other liabilities — rose slightly to $5.6 billion in the first half of the year.
Standard Chartered’s operating expenses declined 1 percent to $5.08 billion, while charges for poorly performing loans and other credit risks rose 16 percent to $846 million, from $730 million in the period a year earlier.
The bank’s common equity Tier 1 capital ratio, a measure of its ability to weather financial disturbances, declined to 10.5 percent at the end of June from 10.9 percent at the end of the year.
