StanChart dives after Iran allegations, downgrades
ReutersThe main branch of Standard Chartered Bank in Hong Kong.
HONG KONG (MarketWatch) -- Shares of
StanChart said Tuesday it "strongly rejects" the position and portrayal of facts by the New York State Department of Financial Services.
The U.K.-based bank, which has a strong focus on emerging economies, said in a statement on its website that more than 99.9% of transactions relating to Iran complied with regulations, and that those didn't were valued at less than $14 million.
Shares of StanChart (2888) (SCBFF) (STAN) tumbled 7.4% in Hong Kong to 174.10 Hong Kong dollars ($22.45) in heavy volumes, with about 3.05 million shares changing hands in the first 100 minutes of trading.
On Monday, StanChart's American Depository Receipts skidded 8.9%, while its London-listed shares sank 6.2%.
Tuesday's drop came as Bank of America Merrill Lynch downgraded its shares to underperform from buy and slashed its price target to HK$186 from HK$219, "given the scale of the allegations and potential for loss."
"While the underlying fundamentals and earnings growth of the group's businesses remain intact, we believe the allegations leveled at StanChart by the [New York regulator] will weigh on the share price for the near term," the BofA Merrill Lynch analysts wrote in a report Tuesday.
Last month, a U.S. Senate committee said HSBC allowed its banking network to be used by drug traffickers, terrorists and rogue states to launder billions of dollars because of poor controls. HSBC admitted lax controls and promised to address the issue. Read full story on the Senate allegations against HSBC.
Analysts at Nomura, meanwhile, downgraded StanChart's London-listed shares to neutral from buy.
In a report released Monday, the New York state DFS said its investigation and review of more than 30,000 pages of documents, including internal bank emails, "describe willful and egregious violations of law."
For almost a decade, StanChart schemed with the government of Iran and hid roughly 60,000 transactions from regulators, involving at least $250 billion that helped the bank earn millions of dollars in fees, the DFS said.
The actions "left the U.S. financial system vulnerable to terrorists, weapon dealers, drug kingpins and corrupt regimes, and deprived law-enforcement investigators of crucial information used to track all manner of criminal activity," the DFS report said.
The regulator directed StanChart to explain the apparent violations of law and demonstrate why its license to operate in New York state shouldn't be revoked.
In its response to the allegations, StanChart said it doesn't believe the DFS statement "presents a full and accurate picture of facts."
It said the bank had in January 2010 "voluntarily approached" relevant U.S. agencies, including the DFS, with its review that focused primarily on transactions relating to Iran in the period 2001 to 2007, and in particular, its compliance with transactions that enabled U.S. dollar trade between Iran and other countries.
"The group's review of its Iranian payments also didn't identify a single payment on behalf of any party that was designated at the time by the U.S. government as a terrorist entity or organization," StanChart said in its statement, adding that the bank had ceased all new business with Iranian customers more than five years ago.