• Shares decline as much as 3.8 percent in London trading
  • U.K. bank says it's co-operating with U.S. investigation

Standard Chartered Plc shares fell as much as 3.8 percent after the Financial Times reported that the bank had dealt with Iranian clients in potential breach of U.S. sanctions.

The British lender handled foreign-exchange transactions and generated revenue from Iranian firms and companies with links to the Middle Eastern country after a pledge to stop working with such customers in 2007, the FT reported on Monday. The bank has previously said U.S. authorities are probing possible breaches of sanctions.

“Standard Chartered is co-operating with an investigation related to possible violations of U.S. sanctions,” a spokeswoman said in an e-mailed statement. “Additional time is needed for the authorities to complete the investigation and determine whether any violations have occurred.”

Standard Chartered was fined $300 million by the New York Department of Financial Services in August last year for failing to flag suspicious transactions, adding to a $667 million settlement in 2012 over breaches of U.S. bans concerning Iran. Mending the bank’s reputation with regulators and preventing future compliance blowups are high on the agenda of new Chief Executive Officer Bill Winters, who replaced Peter Sands in June.

“The group had a number of legacy obligations including dormant accounts, outstanding loans and trade-finance agreements,” Standard Chartered said in the e-mail. “Those legacy obligations have been handled in an appropriate manner in non-U.S. currencies and since 2007 it has been the group’s policy not to pursue any new business with known Iranian entities.”

The stock was down 3.5 percent at 697.3 pence at 11.56 a.m. in London trading. The shares have dropped about 28 percent this year, trailing HSBC Holdings Plc, which has declined 18 percent.

“The FT story is driving weakness in the shares today,” said Gary Greenwood, an analyst at Shore Capital in Liverpool, England, who has a buy rating on the shares. “The risk of fines and penalties is something on the market’s mind, but the real worry is if they lose their U.S. dollar license. That would put a spanner in the works of their trade finance operation.”

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