StanChart to Take $900 Million Charge Over U.S., U.K. Probes

(Bloomberg) -- Standard Chartered Plc is booking a $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 will cover the U.K. bank's estimates for potential penalties from investigations over U.S. sanctions violations, currency trading issues and financial-crime controls, the company said late Wednesday. The emerging markets lender has been bracing for a possible U.S. fine related to past dealings with Iran, and the charge may indicate a settlement is close.

Chief Executive Officer Bill Winters is due to present his plan to improve profitability when the bank reports full-year results on Tuesday. He may also announce a new round of cost cuts to boost a share price that's down around 40 percent since he took over in June 2015.

The provision could wipe out the majority of the bank's second-half profit. Joseph Dickerson, an analyst at Jefferies Financial Group Inc., said in a note this week he estimated the firm would post pretax profit of $1.4 billion in the last six months of 2018, excluding litigation costs.

Shares of Standard Chartered rose as much as 1.3 percent in early London trade.

“Settlement of all material outstanding regulatory issues is a positive development that helps clear the decks for the strategy update next week,” Citigroup Inc. analysts wrote in a note to clients published Thursday.

Read more: StanChart investor hopes for a turnaround

Other global banks are grappling with soaring legal expenses. A French court on Wednesday ordered UBS Group AG to pay more than $5 billion over a tax-evasion case, the biggest fine for a Swiss bank. While UBS said it will appeal, the penalties make up more than its entire profit for 2018.

Standard Chartered settled a currency trading investigation last month and said it received a notice from the U.K.'s Financial Conduct Authority over the financial-crime controls. The FCA plans to impose a penalty of 102 million pounds ($133 million), the London-based lender said. The bank said it's still considering its options related to the FCA's notice.

In the U.S., authorities have been monitoring Standard Chartered since 2012, when the lender paid $667 million and entered into a deferred prosecution agreement to resolve allegations that it illegally processed transactions with Iranian parties. The Justice Department has since extended the agreement multiple times, most recently in December, after saying the bank may have failed to disclose additional violations.

In October, Bloomberg News reported that Standard Chartered was expecting to pay a penalty of around $1.5 billion for allowing customers to break Iran sanctions. Fines of that scale wouldn't materially derail the bank's ability to return capital to shareholders via dividends, Bloomberg Intelligence analysts said last month.

--With assistance from Harry Wilson.

To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net

To contact the editor responsible for this story: Ambereen Choudhury at achoudhury@bloomberg.net

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