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StanChart to take $900 million charge over US and UK probes

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The provision will cover the bank estimates for potential penalties from investigations over US sanctions violations, currency trading issues and financial-crime controls.

Thursday 21, February 2019

(Bloomberg) --Standard Chartered will take a $900 million charge tied to regulatory probes in its fourth-quarter results, a move that will erode earnings as its top executive prepares to unveil a turnaround plan.

The lender has been bracing for a possible US fine related to past dealings with Iran, and the charge may indicate a settlement is close.

Chief Executive Officer Bill Winters is due to present his plan to improve profitability when the bank reports full-year results. He may also announce a new round of cost cuts to boost a share price that is down more than 35 per cent since he took over in June 2015.

The provision could wipe out the majority of the bank’s second-half profit. Joseph Dickerson, an analyst at Jefferies Financial Group, said in a note this week he estimated the firm would post pretax profit of $1.4 billion in the last six months of 2018, excluding litigation costs.

Similarly, other global banks are grappling with soaring legal expenses. A French court on Wednesday ordered UBS Group to pay more than $5 billion over a tax-evasion case, the biggest fine for a Swiss bank. While UBS stated that it will appeal, the penalties make up more than its entire profit for 2018.

Standard Chartered settled a currency trading investigation last month and said it received a notice from the UK’s Financial Conduct Authority over the financial-crime controls. The FCA plans to impose a penalty of 102 million pounds ($133 million), the London-based lender said. The bank said it’s still considering its options related to the FCA’s notice.

In the US, authorities have been monitoring StanChart since 2012, when the lender paid $667 million and entered into a deferred prosecution agreement to resolve allegations that it illegally processed transactions with Iranian parties. The Justice Department has since extended the agreement multiple times, most recently in December, after saying the bank may have failed to disclose additional violations.

TAGS : Standard Chartered, US fine, UK fine, UBS Group, Financial Conduct Authority

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