HONG KONG/LONDON Asia-focused bank Standard Chartered (STAN.L) launched a $5.3 billion rights issue to bolster its finances for new capital rules and provide the firepower to take advantage of growth opportunities, it said.
The bank said it made record profits and income in the third quarter and for the first nine months of the year. Income in the third quarter rose faster than in the first-half and trading levels were almost back to levels of before the financial crisis, it said.
Standard Chartered wants "to continue to seize opportunities across Asia, Africa and the Middle East," it said, adding that the new capital rules could have constrained its asset growth unless new cash was raised.
"It's to safeguard the bank's ability to grow, to take advantage of the opportunities in our markets while also meeting the anticipated changes in the regulatory world," Chief Executive Peter Sands said on a conference call.
He dismissed talk the cash will be used for a big deal, such as in South Africa, which has been rumored. "This is not a war chest for acquisitions," he told reporters.
The offer -- the third-biggest rights issue this year after Deutsche Bank (DBKGn.DE) and UniCredit (CRDI.MI) -- should be well supported by investors and sent a signal that Britain and some other countries may apply tougher capital rules than the new global standard, analysts said.
"Clearly the message is that the UK regulator may be accelerating the Basel III implementation timetable," said Joseph Dickerson, analyst at Execution in London.
Regulators, seeking to prevent a repeat of the global credit crisis, agreed last month to force banks to increase the amount of top-quality capital which they must hold in reserve.
Standard Chartered, based in London but deriving over three quarter of its profits in Asia, follows Deutsche Bank (DBKGn.DE) in raising capital due to the new rules, after the flagship German lender this month raised 10.2 billion euros ($14.2 billion), partly to lift capital.
By 1400 GMT StanChart's London shares were down 1.6 percent at 1,878 pence, valuing the bank at 39 billion pounds. Its Hong Kong-listed shares (2888.HK) closed down 1.3 percent at HK$227.
StanChart said it would offer shareholders the right to buy one new share for every eight shares held at a price of 1,280p, a steep 33 percent discount to Tuesday's close.
The bank's core tier one capital ratio of 9 percent at the end of June was comfortably above the new global minimum of 7 percent. The rights issue will raise that level to about 11 percent, although that would dip to 10 percent after applying a higher risk weighting to its assets under the new Basel rules.
"Basel regulations will be difficult for some Western banks and they want to jump ahead of the line in raising capital before some of the European banks do that," CLSA analyst Daniel Tabbush said.
StanChart said Singapore state investor Temasek TEM.UL, its biggest shareholder with about 18 percent, will support the rights issue.
Some banks believe that to maintain a reputation for financial strength, they need to pre-empt the full impact of the new Basel III rules, which will be introduced gradually by 2019 and will redefine how the ratios are calculated.
Switzerland is planning to apply tougher rules than the Basel standards and Sands said more countries -- including Britain -- were likely to follow, and also seek to implement the rules earlier than 2019. Shares in Barclays (BARC.L) dipped 2 percent on concern it will need to raise cash as a result.
The new tier one requirements also mean banks have to set aside more capital to offset their underwriting activities, which StanChart has been stepping up aggressively this year, getting involved in big loan deals for Bharti Airtel (BRTI.BO), Vedanta Resources (VED.L) and BHP Billiton (BLT.L).
The bank, which made a record half year profit of $3.1 billion, did not take any bailout cash from UK taxpayers during the financial crisis. It raised $2.7 billion in a rights issue two years ago and $1.7 billion more in a share sale in August 2009, saying it wanted to stay ahead of the pack.
The Hong Kong portion of the offer will be priced at HK$156.82 a share.
Shares in StanChart rose on Tuesday as talk resurfaced that JPMorgan (JPM.N) was casting an eye on it, the latest in regular speculation it could be a takeover target. The capital raising could also be to send out a message that it was not up for sale, CLSA's Tabbush said.
StanChart is up some 21 percent this year, comfortably outperforming a 4 percent fall by the European bank sector .SX7P, and its shares trade at a lofty premium to peers.
JPMorgan Cazenove (JPM.N), Goldman Sachs (GS.N) and UBS UBSN.VX are underwriting the issue.
($1=.6336 Sterling=.7187 Euro)
(Additional reporting by Saeed Azhar, Rachel Armstrong, Stephen Aldred and Karolina Tagaris; writing by Lincoln Feast; Editing by Louise Heavens and Erica Billingham)