Standard Chartered Risks Need to Raise Capital, Berenberg Says

Standard Chartered Plc (STAN), the U.K. bank that gets more than three quarters of earnings in Asia, may need to raise $6 billion of capital if it continues to pursue its revenue target, analysts at Berenberg Bank said.

The bank will need to raise the funds to keep its core Tier 1 capital ratio, a measure of financial strength, above 12 percent and maintain a buffer beyond international standards, analysts led by James Chappell wrote in a note to clients yesterday. A spokesman for the London-based bank declined to comment.

Growth of 10 percent is the bank’s “aspiration” though it probably won’t be achieved this year, the company said in August. To avoid the need to raise funds, the bank should focus instead on return on equity, a measure of profitability, rather than revenue or earnings growth, the analysts said. The lender raised about 3.3 billion-pounds ($5.3 billion) in a share sale in 2010.

“We do not believe that Standard Chartered can grow in a similar way to before without increasing volatility and risk in the business due to its size,” wrote the analysts with a sell rating on the stock. “We are not bothered if Standard Chartered loses market share.”

-- Editors: Jon Menon, Simone Meier

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net.

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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