Standard Chartered PLC is to take a US$900 million charge tied to regulatory probes in its fourth-quarter results, a move that will erode earnings as its top executive prepares to unveil a turnaround plan.
The provision would cover the UK bank’s estimates for potential penalties from investigations over US sanctions contraventions, currency trading issues and financial-crime controls, the company said late on Wednesday.
Standard Chartered has been bracing for a possible US fine related to past dealings with Iran, and the charge could indicate a settlement is close.
Chief executive officer Bill Winters is due to present his plan to improve profitability when the bank reports is full-year results on Tuesday next week. He might also announce a new round of cost cuts to boost a share price that is down more than 35 percent since he took over in June 2015.
The provision could wipe out the majority of the bank’s second-half profit.
The firm would post an estimated pretax profit of US$1.4 billion for the second half of last year, excluding litigation costs, Jefferies Financial Group Inc analyst Joseph Dickerson said in a note this week.
As of 10:37am yesterday, shares of Standard Chartered slipped 0.2 percent in Hong Kong. The stock is up about 7 percent this year after dropping 27 percent last year.
Other global banks are grappling with soaring legal expenses. A French court on Wednesday ordered UBS Group AG to pay more than US$5 billion over a tax-evasion case, the biggest fine for a Swiss bank.
While UBS said it would appeal, the penalties make up more than its entire profit for last year.
Standard Chartered last month settled a currency trading investigation and said it received a notice from the UK’s Financial Conduct Authority (FCA) over the financial-crime controls.
The FCA plans to impose a penalty of ￡102 million (US$133.4 million), the London-based lender said.
The bank said it is still considering its options related to the FCA’s notice.
In the US, authorities have been monitoring Standard Chartered since 2012, when the lender paid US$667 million and entered into a deferred prosecution agreement to resolve allegations that it illegally processed transactions with Iranian parties.
The US Department of Justice has since extended the agreement multiple times, most recently in December last year, after saying the bank might have failed to disclose additional contraventions.
In October, Bloomberg News reported that Standard Chartered was expecting to pay a penalty of about US$1.5 billion for allowing customers to break Iranian sanctions. Fines of that scale would not materially derail the bank’s ability to return capital to shareholders via dividends, Bloomberg Intelligence analysts said last month.
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