Investors are proving slow to rally behind Standard Chartered after allegations the bank broke US sanctions against Iran, spooked by talk of risky countersuits, record fines and fears that top executives could lose their jobs.
Chief executive Peter Sands’s defence of StanChart’s cherished image as one of the cleanest names in global finance has so far failed to convince some shareholders, who are taking their time to reappraise their exposure to the latest in a string of British banking scandals.
StanChart lost more than a quarter of its market value in 24 hours after the New York State Department of Financial Services accused the bank on Monday of assisting $250 billion of money-laundering transactions with Iran, earning lucrative fees over nearly 10 years.
The volume of illicit transactions has been fiercely contested by StanChart executives, who claim just $14 million worth of deals flouted the strict US rules.
At 1,363 pence, StanChart shares are still trading around 15 per cent down on levels before the New York regulator branded it a “rogue institution”, reflecting concerns it could struggle to shake the tag off.
“Even if it is only $14 million, they have still committed a crime, and they are still guilty,” one top 10 investor said, explaining why the shares remained depressed. And if this is hot air and they are just bluffing, then they are playing a very dangerous game,” the investor said, putting the risk of either Sands or Chief Financial Officer Richard Meddings quitting the bank at “five to eight per cent and rising”.
The bank faces a huge fine, and even its state banking licence is under threat, a punishment that would paralyse its US operations and relegate the London-listed institution to the second tier of global banks.
One top 25 investor said speculation that StanChart could countersue the DFS for injury to its reputation and stock price were adding to worries about the potential loss of US business.
“I think the phrase ‘Don’t fight the Fed’ applies in more ways than just one. Who knows what else the regulator could unearth if they really wanted a fight?” he said.
“(StanChart) tend to have a chippy approach which doesn’t always win friends, and they need to be careful ... I would rather see them settle and leave this whole sorry saga behind them.”