Broker snap: StanChart uncertainty could drag on for a while

8th Aug 2012 11:21

Credit Suisse has retained its cautious stance on under-fire lender Standard Chartered on the back of its struggles with US regulators in regards to its alleged dealings with the Iranian government.The New York State Department of Financial Services (DFS) claims that for nearly a decade, Standard Chartered Bank (SCB), a wholly-owned subsidiary of Standard Chartered, engaged in deceptive and fraudulent misconduct in order to move at least $250bn through its New York branch on behalf of client Iranian financial institutions that were subject to US economic sanctions, and then covered up its transgressions.Credit Suisse said: "With the financial impact impossible to quantify at this stage, we have had more than 100 calls with investors on the potential implications and believe it is more important to gauge the sentiment based on the key investor concerns."StanChart trades at 1.3 times full-year tangible net asset value for a 14-15% return on tangible equity despite the recent sell-off. "We remain 'neutral' though the shares could drift lower from here until we get more clarity," the broker said."The shares are back around the levels where they traded in June, but at the time we had not anticipated this additional risk factor and so would not chase the stock."Due to the spread between the company's and the authority's estimates regarding the value of the transactions that did not follow regulations - 'under $14m' versus 'at least $250bn' - the broker says that investors are after more help in reconciling the numbers. "More explanation in terms of why the $250bn is not the right figure to look at."The broker said: "We do not necessarily see August 15th as the definitive date for this matter, and think the uncertainty could drag on longer."Credit Suisse prefers global banking peer HSBC, which it rates as 'outperform', one of its top picks in the European banking sector.Following a 16% slump yesterday, StanChart was pulling back on Wednesday, trading 8.83% higher at 1,337p by mid-morning.BC