THERE’S something that doesn’t ring quite true about Standard Chartered’s insistence that it is tapping shareholders for £3bn to boost its capital buffers. Management is adamant that cash won’t be used for acquisitions, but we’re not so sure. With a core Tier 1 capital ratio of nine per cent at the end of June, its capital levels are pretty solid.
It’s true that some local private sector banks in Hong Kong, India and Singapore are better prepared for Basel III (which calls for a Tier 1 of seven), with capital ratios nearer the 11 or 12 mark. But even if it does want to improve its capital position, this is an overly cautious move: it has three years to comply with the new regulations from the Bank of International Settlements, and could easily limit the dividend slightly or marginally scale back investment.
Then there’s the timing: just as rumours that JP Morgan is about to buy Standard Chartered start to take on a life of their own, the latter announces a shock rights issue. Coincidence? Perhaps. But £3bn would enable Standard Chartered to bulk up with a series of bolt-on acquisitions, employing the so-called “fat man” defence and repelling any unwanted advances. We expect Standard Chartered to hit the acquisition trail in the near future. Watch this space.