Add Standard Chartered PLC: IIFL

“Standard Chartered Plc (SCB) has announced that it plans to raise USD 5.1 billion in a 1-for-8 rights issue. This announcement overshadowed the Interim Management Statement (IMS), which supported our view that SCB is on track to achieve record profit in 2010. While the bank is currently well-capitalised, an expected 1% decline in Core Tier-1 Car under Basel III norms, acceleration in the implementation timetable by its principal regulators, maintenance of counter-cyclical buffers, and surcharge on systemically important banks are reasons to raise capital.”

“The IMS commented that wholesale banking income is growing in double-digits, financial markets’ volumes are higher, impairment charges remain low and there is continued momentum in consumer banking. This supports our view that SCB’s net profit will grow by 20% annually during 2010-12ii. We raise our net profit estimate by 1.5% for 2010ii and 2.5% for 2011ii, but lower our recommendation from BUY to ADD,” says IIFL research report.

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