Standard Chartered reveals $5.1B rights issue

Neelabh Chaturvedi
An illuminated Standard Chartered Plc logo is displayed on the Standard Chartered Bank building.
Jerome Favre | Bloomberg | Getty Images

Standard Chartered Tuesday announced plans to raise £3.3 billion ($5.1 billion) in capital through a rights issue, as the bank reported a pre-tax loss of $139 million for the three months through September.

The emerging market-focused bank also announced a strategic review that will see it cut 15,000 jobs, and focus more on affluent retail clients and less on companies and institutional clients, as part of a broader embrace of its more profitable, less capital-intensive businesses.

The rights issue has been priced at a 34 percent discount to Monday's closing share price.

Standard Chartered will issue two new shares at 465 pence each for every seven held to strengthen its balance sheet. It also scrapped its final dividend for the current financial year.

The performance marks a reversal of fortune for Standard Chartered, which for years had steered cleared of the difficulties that befell many of its rivals during the financial crisis by focusing on faster-growing markets in Asia and Africa. It also presents a clear priority for new chief executive Bill Winters, who made his name as a high-flying dealmaker at JPMorgan.

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"The business environment in our markets remains challenging and our recent performance is disappointing," Winters said in a statement. "We are positioning the group for improved return on equity on a strengthened capital base."

Standard Chartered said the third-quarter operating loss reflected previously announced business divestments and de-risking initiatives, combined with challenging conditions in the group's key markets due to depressed commodity prices and the broader impact of the slowdown in China.

The loss compared with an operating profit of $1.53 billion in the same quarter last year.

Loan impairment charges remained elevated, while income fell 18 percent on-year, reflecting a decline in client activity as a result of volatile market conditions.

The bank also said it would invest heavily in Africa and Hong Kong, but restructure retail and commercial operations in China and Korea.