Investec downgrades StanChart but quashes need to raise capital

17th Feb 2015 11:01

Investec has "very reluctantly" lowered its rating for emerging markets-focused banking group Standard Chartered from 'buy' to 'hold', saying it sees a heightened risk of a capital-raising in 2015.The broker slashed its target price for the shares from 1,250p to 1,000p."We continue to believe that STAN has no need to raise capital, and that it would be ill-advised to do so, but we feel like we're losing that argument," Investec analyst Ian Gordon said."Given heightened speculation of further management change, we see increased risk of such shareholder-unfriendly action being taken. If management, old or new, has the courage to face down its critics, and deliver credible reassurance that it will not raise capital, we think the shares could recover strongly, but that's now an 'if'."However, Gordon stressed: "To be clear, we do not recommend shorting the stock".He said that the stock, which has already risen 9% since 2 February, could "re-rate materially" if management resists pressure to raise capital.By the half-year stage in 2014, Standard Chartered's CET1 capital ratio was 10.7%, offering over two percentage points of headroom against regulatory requirements."Given robust profitability and balance sheet shrinkage in Q3, we think capital is adequate," Gordon said.The shares were down 0.5% at 945.8p by 11:34.