Despite markets pausing for breath after recent rises, Standard Chartered shook off news that it would pay a $300m penalty to US authorities for lapses in its anti-money laundering procedures.
The fine, its second in the US for two years, accompanies restrictions relating to clients in Hong Kong and UAE, but analyst Ian Gordon at Investec kept his buy recommendation:
The scale of this financial penalty appears (to us) to be very high in relation to its alleged failings, but as in 2012, Standard Chartered appears quite unable to protect itself against the New York Department of Financial Services. In addition to the financial penalty, so-called "remedial measures" appear to be slightly more intrusive than anticipated on 6 August.
There appears to be no suggestion by the NYDFS of any wrongdoing or breach of regulations by Standard Chartered. What it claims to have identified is a deficiency in a surveillance system at Standard Chartered'sNew York branch to identify and/or flag certain "high risk" transactions.
Further temporary restrictions are imposed relating to (a very small part of) Standard's dollar clearing for certain SME clients in Hong Kong and UAE, and prior approval is required for new dollar-clearing relationships. Standard's growth strategy is primarily focused on deepening existing relationships.
Our initial view is that the adverse earnings impact of the temporary remedial measures should be contained to 1-2% of group earnings. The Corporate and Institutional Clients business is, we believe, substantially unaffected, with the measures targeted at a very small element of Hong Kong small businesses and a small business/retail customer set with some tens of millions of income where the risk-adjusted returns are no longer attractive anyway. Standard remains fully committed to the wider Hong Kong and UAE markets.
While we are concerned that there appear to be few checks and balances on the behaviour of New York'sDepartment of Financial Services, we believe that the vast majority of Standard Chartered's business is unaffected by the NYDFS' latest ruling, and we continue to expect to see the resumption of (modest) revenue-led growth in the second half of 2014.
Standard Chartered ended 3.5p higher at £12.21.
Overall the FTSE 100 finished down 23.83 points at 6755.48 after five days of rises, as investors turned more cautious. The surprise news that two members of the Bank of England's monetary policy committee had voted earlier this month for an interest rate rise caused further uncertainty about when the prolonged spell of cheap borrowing would finally end. News that Carlsberg had been hit by problems in the Russian market also hit sentiment.
German and French markets also edged lower but on Wall Street, the Dow Jones Industrial Average was up around 30 points by the time London closed.
A number of UK listed companies going ex-dividend also helped weaken the market. In the FTSE 100, these included British American Tobacco, down 64p to 3517.5p, Mondi, 19p lower at £10.04 and Prudential, off 5.5p at 1425.5p, and in the mid-cap housebuilder Berkeley, which fell 157p to £24.26.
After Tuesday's disappointment from BHP Billiton, which unveiled a demerger but failed to announce a cash return to shareholders, Glencore pleased investors with a $1bn share buyback. The commodity trader and miner said it would launch a buyback programme over the next six months, as it beat forecasts with an 8% rise in first half profits to $6.5bn. Its shares added 1.55p to 360.5p.
Investors sought havens as risk appetite eased, with utilities in demand. SSE was up 12p at £15.17, Centrica climbed 1.8p to 316.7p and United Utilities rose 14p to 890p.
Among the mid-caps Balfour Beatty dropped 17.1p to 238.9p after it rejected the latest offer from predator Carillion, 6.7p lower at 330p. The news prompted Carillion to withdraw it proposal.
Finally, British Airways owner International Airlines Group, up 2.8p to 344.2p, and easyJet, 4p higher at £13.39, shook off worries about possible flight disruption by activity at Iceland's largest volcano Bardarbunga. Robin Byde at Cantor Fitzgerald said:
Although this is an early warning and clearly a lot will depend on whether there is an eruption, wind patterns etc, investors will be concerned for trading and earnings. However, we also note that the European airlines sector is down 30% since April and, although we expect this news to weigh on the sector, this recent sell-off might limit further weakness.