The prospect of another $1.5bn in fines for Standard Chartered Plc is stirring concern that chief executive officer Bill Winters may have to scale back dividend plans at the Asian-focused lender.
The new penalty is the amount the London-based bank may face from US authorities for allowing customers to violate Iran sanctions, Bloomberg reported on Monday, citing people familiar with the matter.
Standard Chartered shares fell a further 1% yesterday, adding to a slump of more than 3% the day before.
“Standard Chartered’s capital position looks relatively comfortable, though a fine of this significance may make management think twice about the level of the final dividend,” said Laith Khalaf, a senior analyst at Hargreaves Lansdown Plc.
“It would be galling for shareholders.”
The potential $1.5bn fine is a preliminary assessment based on some of the communications between the bank and the regulators, the people said, adding that final discussions to resolve the issue have not yet begun.
The allegations relate to breaches dating from at least five years ago.
A fine that size would be triple the $500mn forecast by analysts at Keefe, Bruyette & Woods.
Analysts Edward Firth and Richard Smith lowered their 2018 forecast for Standard Chartered’s common equity Tier 1 ratio, a measure of financial strength, to 13.3% from 13.7%.
Standard Chartered, which had suspended its dividend for two years as Winters revamped the bank, said in February it would pay a full-year dividend of 11 cents per share.
It said it planned to raise the dividend as performance improves.
“A new fine may raise a question over the pace of dividend payout increase,” Morgan Stanley analysts said in a note to clients.
It has an “underweight” rating on the stock.
A coalition of enforcement and regulatory agencies, including the Justice Department, New York’s Department of Financial Services and the Manhattan District Attorney have finished their investigation and may announce the resolution by the end of the year, people with knowledge of the talks told Bloomberg in August.
American authorities have been keeping an eye on Standard Chartered since 2012, when the lender entered into a deferred prosecution agreement to resolve US allegations that the bank facilitated business with Iranian
parties.
The US extended the DPA in 2014.
Since then, US President Donald Trump has taken a harder line on Iran, viewed by the administration as a state sponsor of terrorism.
A DOJ spokesman declined to comment.
“As previously disclosed, we continue to cooperate fully with the investigation regarding our historical sanctions compliance, and are engaged in ongoing discussions with the US authorities,” the bank said in a statement.
The potential new penalties relate to whether the emerging- markets lender also allowed Iranian-linked entities to move money through a Dubai unit, one of the people said.
The authorities are examining whether “conduct and control failures permitted clients with Iranian interests to conduct transactions through Standard Chartered Bank after 2007, and the extent to which any such failures were shared with relevant US authorities in 2012,” the company said in a filing earlier this year.