Broker snap: Settlement reduces risks at StanChart, says Nomura

15th Aug 2012 11:27

Standard Chartered's settlement with New York regulators has reduced the tail risk surrounding the bank and while threats still remain, Nomura has pushed its rating on the stock back up to 'buy'.The broker reinstated its 'buy' recommendation (previously 'neutral') on Wednesday morning on the news that StanChart will pay $340m to the New York State Department of Financial Services to settle the claims that its US subsidiary illegally processed payments for Iran."Management have done well to deal with this issue in a way that makes economic sense. As such, we now move back to fundamentals; however, the full previous valuation may take some time to recover."As investigations are ongoing, there is still uncertainty around the ultimate size of the penalty, but the key threat to STAN was the loss of its banking licence, and we see this risk to be materially lower now."Nomura said that the bank's attraction is still its balance sheet which is strong and "geographically-advantaged", with the lender being mainly focused on Asia. The broker's target price for StanChart is lifted from 1,500p to 1,600p.By 11:26 on Wednesday, shares were up 4.64% at 1,433.50p.BC