Bangkok--26 Nov--Moody's Investors
Moody's Investors Service upgraded the long-term deposit and senior debt ratings of Standard Chartered Bank toA1 from A2 as well as its Bank Financial Strength Rating (BFSR) to B- from C+. The long-term senior debt rating of Standard Chartered PLC was upgraded to A2 from A3. All the ratings carry a stable outlook.
RATINGS RATIONALE
"The upgrade reflects Standard Chartered's improving capitalization as a result of its USD5.2 billion rights issue, launched last month", said Patrick Winsbury, a Moody's Senior Vice President. "The rating action also reflects the group's improving diversification and the franchise gains it has made during the global financial crisis".
The rights issue places the capitalization of Standard Chartered group more in line with other highly-rated emerging market banks. Standard Chartered will now be strongly positioned to accommodate increases in regulatory capital requirements -- including any additional buffers that may be imposed for counter-cyclicality and systemic importance -- as well as to support its strong organic growth on the back of favourable economic conditions in its core markets in Asia, Africa and the Middle East.
It is Moody's expectation that Standard Chartered will in future operate with a structurally higher level of capital than pre-crisis. We view this to be credit-positive because -- although the current performance of emerging markets is strong -- they do tend to experience pronounced cycles over time. Furthermore, due to the concentrated nature of emerging market economies, emerging market banks tend to have high single-name exposure concentrations. In Standard Chartered's case, this characteristic is amplified by its successful focus on deepening relationships with its major corporate clients.
Standard Chartered has over the years diversified its operations both geographically and in terms of product capability, in particular in the wholesale bank arena. The group has raised capital twice before during the global financial crisis, and used its increased balance sheet strength to improve its market position. The group has notably increased its share of banking revenue from key corporate clients, who have been attracted to its strong profile and its balance sheet capacity to accommodate their financing requirements. Standard Chartered has also benefitted from a flight to quality in deposits.
The rating outlook is stable. Moody's would not anticipate further upward movement in the Standard Chartered group's ratings without a de-risking of its business model, in particular with regard to single-name exposure concentrations. Conversely, the group's ratings would likely face negative pressure if the bank's Tier 1 capital ratio fell below 10%, or if problem loans exceeded 20% of capital and loan-loss reserves.