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Fine of $340m a 'Favourable Outcome' for Standard Chartered

Morningstar analysts may raise their fair value estimate for Standard Chartered after the firm avoided a court hearing by agreeing to settle charges of money laundering

Holly Cook 15 August, 2012 | 1:00PM

Standard Chartered (STAN) this morning confirmed Tuesday’s reports that it has settled charges levied by New York banking regulators for $340 million. The allegations brought by the New York State Department of Financial Services (DFS) that the bank helped Iranian clients launder money over a ten year period up to 2007 caused shares in the UK lender to plummet last week.

Standard Chartered initially lost around a quarter of its market value in the hours following the emergence of the allegations, but shares have since rebounded 19%, helped by a near-5% jump on the back of the settlement news.

However, other US regulators were not part of the settlement and additional charges could still be forthcoming.

Morningstar analyst Erin Davis considers the settlement to be “very good news” for Standard Chartered, as it averts the loss of its New York banking licence, which she saw as an unlikely worst-case outcome. Moreover, the timely settlement has staved off the hearing that was scheduled for today, thus minimising the damage to Standard Chartered's reputation. Davis notes that the $340 million fine, while substantial, is less than the $619 million recently paid by ING (ING) to settle charges that it allowed Cuban and Iranian clients to launder money through its offices. “We had conservatively included a fine of $800 million in our fair value estimate for Standard Chartered,” says Davis, adding that she may now raise the fair value estimate slightly to incorporate the more favourable outcome.

Read Davis' full research report for Standard Chartered here.

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Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
Standard Chartered PLC1,214.00 GBX0.08
About Author Holly Cook

Holly Cook  is Managing Editor of Morningstar.co.uk