Standard Chartered Bank offers existing shareholders 30 new shares for every 91 already held at 390 pence ($5.81) per piece, or a 48.7 percent discount to last Friday's closing share price, in a bid to boost its capital. Bloomberg

UK-based bank, Standard Chartered Plc, yesterday announced that it would raise 1.8 billion pounds ($2.68 billion) in a rights issue to bolster its capital reserves.

The funds, the lender said, will also give it flexibility to take advantage of the opportunities in the current turbulent markets.

The bank will offer existing shareholders 30 new shares for every 91 already held at 390 pence ($5.81) per piece, or a 48.7 percent discount to last Friday's closing share price, according to a statement released by the bank yesterday.

"The proceeds from the rights issue will further strengthen our competitive position as significant opportunities emerge in our markets," said Peter Sands, the bank's chief executive, in a statement.

The bank said Singapore state investment company Temasek, its biggest shareholder with an 18.99 percent stake, planned to take up its rights and was also participating in the underwriting of the issue.

Sands said the bank was already meeting its capital requirements and its Tier 1 ratio was already above the new UK government minimum of at least 8 percent. He added that the bank has decided on the rights issue because it was "aware that investors are looking for banks to hold more capital" and because it could "see merit in holding more capital than we need as a buffer in turbulent times."

Analysts, however, believe the lender's move was prompted by the mounting concerns of the global economic recession, which is threatening relatively well-capitalized banks.

Standard Chartered last week lowered its economic growth outlook by more than half in some of its biggest markets, including Hong Kong, and is cutting jobs in South Korea.

Nomura Research, a think-tank and systems integrator in Japan, said in a report last week it was negative toward Standard Chartered because it may suffer losses from emerging markets.

The rights issue announcement coincided with an interim result in which Standard Chartered said it continues to perform strongly in the second half of this year, although its African, Asian and Middle Eastern markets are not completely immune to the global financial crisis.

"Standard Chartered is well positioned to continue to weather the economic uncertainties and to take advantage of opportunities as they emerge," Sands said.

Despite the extraordinary events of the last few months, which have left no major financial institution unaffected, the financial performance and asset quality of the group remain strong, the bank said.

At the group level, income growth remains strong, driven by the continued strong performance of its wholesale banking business. However, consumer banking revenue growth continues to slow.

The bank expects the expense growth will be broadly in line with income growth this year.

(HK Edition 11/25/2008 page2)