Standard and Poor’s downgraded Standard Chartered Plc for the first time in 20 years, after the bank forecast a second year of falling profit.
S&P cut the group’s credit grade one level to A from A+, with a negative outlook, according to a statement. The lender reported falling revenue, increasing operating expenses and higher loan impairments in the third quarter, helping drive down the stock the most of any major British lender this year.
Standard Chartered “is going through a tough period of late after many years of solid growth and strong financial performance,” S&P analysts Joseph Leung and Giles Edwards said in the statement. “The group’s performance weakened partly because subdued trading conditions have hit revenues while operating expenses continue to grow.”
Chief Executive Officer Peter Sands, 52, and Chairman John Peace have come under pressure amid a 31 percent decline in the shares this year. The bank met with its biggest investors this month to outline a refined strategy and reassure them it would continue to cut costs to help return to profit growth. The London-based bank, which makes about three-quarters of its earnings in Asia, is closing businesses and eliminating jobs after a drop in earnings last year ended more than a decade of growth.
The shares fell 0.2 percent to 938.1 pence at 11:26 a.m. in London. It has a market value of about 23 billion pounds ($36 billion), about a quarter less than its book value.
The bank was assessed as A- when it first gained a credit rating in 1994, and was subsequently upgraded 3 times to AA- in 2011, according to S&P’s Edwards.
The bank last month posted a 16 percent drop in third- quarter pretax profit to $1.53 billion from a year ago as impairments for bad loans almost doubled and regulatory and compliance costs increased. Underlying profit for the second half will decline from a year earlier, the bank said at the time.
“Despite recent management turnover and the unproven effectiveness of the refreshed strategy” the ratings company said it “still considers Standard Chartered to be among the most creditworthy commercial banking groups globally.”
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