UK MIDDAY BRIEFING: Standard Chartered Faces New US Fine

LONDON (Alliance News) - Standard Chartered Wednesday said it faces a new fine from US regulators due to problems identified within part of its anti-money laundering systems and controls, the latest difficulty to emerge at the FTSE 100 bank as it tries to turn around its business amid lower profits and increased impairments.

The emerging markets-focused bank said the issues were uncovered in its post-transaction surveillance system. It said it is in discussions with the New York Department of Financial Services and the independent monitor over the issues.

The bank's latest disclosure comes two years after Standard Chartered agreed to pay USD667.0 million in civil penalties to various US authorities after the New York regulator said the bank had failed to comply with US sanctions placed on Iran. The agreement with the New York State Department of Financial Services saw Standard Chartered agree to install a monitor – reporting directly to the department and evaluating money-laundering risk controls - for at least two years.

The new regulatory issues are in an area separate from the sanctions screening systems.

Standard Chartered reported a small slip in half-year pretax profit, with the decline limited thanks to the non-repeat of a USD1.0 billion goodwill impairment charge for its Korea business, though its operating performance was hit by a weaker performance in its financial markets division. The bank said it made a USD3.25 billion pretax profit in the six months ended June 30, compared with USD3.33 billion in the corresponding period last year.

Before own-credit adjustments and the goodwill impairment last year, pretax profit fell by 20% to USD3.27 billion. Net interest income was broadly flat at USD5.60 billion, but non-interest income fell to USD3.65 billion, from USD4.39 billion, due to drops in fees and commission income and net trading income. Operating expenses edged up slightly to USD5.08 billion from USD5.03 billion. Impairment losses on loans and advances and other credit risk provisions increased to USD846.0 million from USD730.0 million.

"Our performance in the first half of 2014 is clearly disappointing," Sands said. "It is not what we strive for and not what our investors expect. In March, we made clear that this first half would be tough, and we were even more specific in our pre-close trading statement in June."

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Markets: Stocks are trading significantly lower across the UK and Europe, following a negative session in both the US and Asian markets, as global investor sentiment takes a knock from signs of increasing tension among Russia, Ukraine, and western leaders.

Futures markets indicate that Wall Street will open slightly lower Wednesday, following on from the declines on Tuesday.

FTSE 100: down 1.2% at 6,602.94
FTSE 250: down 1.3% at 15,158.50
AIM ALL-SHARE: down 1.0% at 747.90
GBP-USD: down at 1.6830
EUR-USD: down at 1.3338
GOLD: flat at USD1,288.50 an ounce
OIL (Brent): down at USD104.82 a barrel
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Other Top UK Corporate News
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Barclays said it will continue receiving legal advice and will work to evaluate the potential financial impact of the decision made by the US Court of Appeals for the Second Circuit on Tuesday regarding Lehman Brothers Holdings Inc. The court ruled the bank will be entitled to around USD6 billion in disputed assets as part of its acquisition of Lehman's brokerage unit at the height of the financial crisis in 2008. The decision will be a setback for Lehman creditors, who have been working to recoup money. The dispute centres on how to dispose of 'cash' assets held by the brokerage, which was acquired by Barclays following Lehman's collapse into bankruptcy in September 2008. This includes around USD4 billion in margin assets held by third-parties and USD1.9 billion in clearance box assets used to process securities trades.
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BHP Billiton's iron ore exports could be set to slow, after tug boat engineers at Australia's biggest iron ore port announced plans on to stop work for four hours on August 9, 11 and 13 over a pay dispute. The strike by the Australian Institute of Marine and Power Engineers at Port Hedland continues a dispute with Teekay Shipping, a part of Teekay Corp, which moves a quarter of the world's seaborne iron ore and more than half of Australia's iron exports. However, BHP said that it will take steps to stop the industrial action as it believes the union missed a deadline to file notice of a work stoppage.
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Legal & General Group reported a 7.1% rise in pretax profit, driven in the main by the performances of its retirement and private equity arms. Legal & General increased its interim dividend to 2.90 pence from 2.40p. In a statement, the FTSE 100 life pensions and investment company reported a GBP636.0 million pretax profit in the six months ended June 30, compared with GBP594.0 million in the corresponding period last year.
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Low-cost airlines easyJet and Ryanair Holdings reported rises in traffic and load factors for July. easyJet said it flew 6.4 million passengers during the month, up 7.7% on the 6.0 million passengers flown in July last year. Load factor - the measure of how full its seats were - also rose during the month, up 1.3% to 92.9% from 91.6% a year earlier. Ryanair said its traffic in July rose 4% to 9.15 million passengers from the 8.84 million flown in July last year, while load factor was 3% higher at 91%, from 88% in July 2013.
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Water industry regulator Ofwat wrote to United Utilities Group, Bristol Water and Thames Water Utilities to inform the companies their re-submitted plans on individual price controls still contain "very material differences" against its assessment on efficient wholesale costs. The watchdog said its concerns centre on United Utilities' wholesale wastewater price control, the future planned expenditures on the wholesale water price control plans at Bristol Water, and the proposed separate price control for Thames Water's Thames Tideway Tunnel project.
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The Sage Group said that it has appointed Stephen Kelly as group chief executive officer, succeeding Guy Berruyer, with effect from November 5. Kelly has served as chief operating officer for the UK government, responsible to the minister for the Cabinet Office since 2012. In the role he was responsible for Efficiency & Reform, as well as encouraging the government's agenda for small and medium-sized organisations. Before this he held roles at at NASDAQ-listed Chordiant Software Inc and London Stock Exchange-listed Micro Focus International PLC.
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SABMiller plans to appoint Jan du Plessis as chairman in July next year, to succeed John Manser. In December last year, Chairman Graham Mackay died after battling with a long-term illness. The board appointed acting Chairman John Manser as chairman with immediate effect, and appointed Guy Elliott as senior independent director in succession to Manser. In a statement, SABMiller said du Plessis, aged 60, will join the board as an independent non-executive director with effect from September 1, after which it intends to appoint him as chairman in succession to Manser at the conclusion of its annual general meeting in July 2015, when Manser retires.
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Ferrexpo said pretax profit jumped in its first half due to a large reduction in operating costs through production efficiencies and the devaluation of the Ukrainian currency. The iron-ore producer, which operates solely in Ukraine, said its pretax profit increased 65% to USD247.6 million for the six months ended June 30 from USD149.9 million the previous year. The company said revenue fell 2.0% to USD758.9 million from USD774.7 million due to lower benchmark iron ore prices, which on average fell by 19% compared to the same period the previous year. Ferrexpo maintained its interim dividend at 3.3 US cents per share.
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Grainger said group sales revenue fell in the ten months to July 31 but profits were boosted on the back of better margins on its sales and a rise in prices achieved against the comparable period last year. The residential property company said group sales revenues totalled GBP236.5 million for the period, a drop against the GBP258.7 million a year earlier. The fall came in spite of a rise in the number of units sold by the firm over the period, up to 2,358 against 2,091 a year earlier.
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Interserve posted a big rise in revenue and pretax profit in the first half of 2014 and hiked its dividend on the back of improved demand in its international construction and support-services businesses. The FTSE 250-listed support services and construction firm said revenue jumped 29% to GBP1.37 billion in the six months ended June 30, from GBP1.07 billion in the same period a year earlier, boosted by higher revenue from its support services, construction and equipment services businesses. Pretax profit rose 36% to GBP50.2 million, from GBP36.8 million last year, and the company hiked its interim dividend by 10% to 7.5 pence, from 6.8 pence. The group said it secured GBP2 billion in new contracts over the six-month period and said its pipeline of future work now stands at GBP7.5 billion.
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AIM MOVERS
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Tricorn Group is up after Avingtrans said it had struck a deal to acquire the trade and certain assets of Tricorn's subsidiary RMDG Aerospace for GBP1.1 million. Zamano is also up after it said it has recorded a "material increase" in first-half revenue compared to the immediately previous six-month period, boosted by better UK and Australian sales. Zamano said it is now focused on looking for acquisition, investment and joint-venture opportunities in the UK and Ireland in order to accelerate the development of the business. The Hotel Corp is a big faller after it said that the UK Group of Hotels, in which it holds 49.92% interest, has gone into administration. The Hotel Corp's investment was fully written down in the accounts of the company as at December 31, 2013. Acta SpA is also sharply lower after it raised GBP2.0 million via a share placing with institutional investors, funds it said it will use to finance working capital requirements for its current commercial expansion. SolGold is down after it finished drilling Hole 7 at the Cascabel copper-gold porphyry project in Ecuador, and said it encountered progressively falling levels of mineralisation from 1,298.3 metres depth.
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Top Economics And General
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British industrial production grew by less than expected in June as oil and gas extraction declined from May, data showed. Month-on-month, industrial and manufacturing output grew 0.3% each in June, the Office for National Statistics said. Economists had forecast both industrial production and manufacturing output to rise 0.3%. The increase in June reversed a 0.6% fall in May industrial output. Manufacturing output was down 1.3% in May. On a yearly basis, industrial production grew 1.2% in June, slower than the 1.5% rise forecast by economists. At the same time, manufacturing output advanced 1.9%, which was also weaker than the expected increase of 2.1%.
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UK house prices increased more than expected in July, reversing the last month's decline, data showed. House prices grew 1.4% in July from the prior month, survey data from Halifax showed. Economists had forecast a 0.4% rise in July after falling by revised 0.4% in June. Halifax said monthly movements tend to be volatile. Since last December there have been four monthly price increases and four price falls. In three months to July, house prices were 3.6% higher than in the preceding three months. On a yearly basis, prices continued its upward trend. Prices advanced 10.2% from the same period of last year.
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The UK Department of Energy & Climate Change announced new legislation aimed at stopping price rigging in the wholesale gas and electricity market. Under the new proposals, anyone found guilty of energy price rigging faces up to two years in jail, when currently people can only be investigated and fined for manipulating the energy market.
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German factory orders declined unexpectedly in June as both domestic and foreign orders decreased from prior month, data showed. Factory orders were down by an adjusted 3.2% in June from May, when it fell by 1.6%, Destatis reported. Economists had forecast a 0.9% increase for June. Within total orders, domestic orders declined 1.9% in June. Foreign orders dipped by 4.1% as demand from euro area plunged 10.4%.
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Ukraine said Tuesday its forces were preparing to take control of the rebel-held cities of Donetsk and Lufthansa, where the humanitarian situation was rapidly deteriorating according to local authorities. The United Nations said that some 730,000 people have left the region for Russia, while Russia reiterated that it wants a "humanitarian mission" deployed in eastern Ukraine. In Washington, the Pentagon said that the Russian military build-up of more than 10,000 troops had moved closer to Ukraine's eastern border. They were equipped with artillery, armored tanks, air defence and special forces, said spokesman Admiral John Kirby.
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Israeli and Egyptian officials held several hours of talks on a long-term Gaza truce late on Tuesday after a three-day ceasefire went into effect and the last Israeli soldiers pulled out of the Palestinian enclave. The Israeli delegation returned to Tel Aviv before midnight, as planned, after Egyptian security officials updated them on demands put forward earlier by Palestinian negotiators, an Egyptian security source who accompanied the delegates to Cairo airport told dpa.
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The death toll rose to 589 from an earthquake in south-western China, with nine people still missing and 2,401 injured, the Ministry of Civil Affairs said. Military and civilian rescue teams were still battling to send medical aid and relief supplies to remote villages in the mountainous region. They were clearing blocked roads and trying to drain several barrier lakes formed by landslides. Sunday's 6.5-magnitude quake was the most damaging one in Yunnan province for 14 years, forcing the evacuation of 230,000 people from collapsed homes and vulnerable areas, the provincial government said.
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A uniformed Afghan soldier killed a top US officer and wounded a German brigadier general and 14 others Tuesday in a shooting attack at a military school west of Kabul, Afghan and German defence officials said. The Pentagon identified the US officer as Major General Harold J Greene, a 34-year-veteran of the Army. The two-star general was believed to have been the highest ranking US soldier killed in the war since the terrorist attacks on the US on September 11, 2001, said Admiral John Kirby, the spokesman.
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Afternoon Watchlist (all times British Summer Time)

13:30 US Trade Balance
15:00 UK NIESR GDP Estimate
15:30 US EIA Crude Oil Stocks change

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Thursday's Key UK Corporate Events

Hardy Oil & Gas Interim Management Statement
LondonMetric Property Interim Management Statement
Henderson Group Half Year Results
Cobham Half Year Results
RSA Insurance Group Half Year Results
Spirax Sarco Engineering Half Year Results
UDG Healthcare Interim Management Statement
Coca-Cola HBC Half Year Results
Old Mutual Half Year Results
Randgold Resources Half Year Results
AMEC Half Year Results
Aviva Half Year Results
Enterprise Inns Interim Management Statement
Fidelity China Special Situations Interim Management Statement
Rio Tinto Half Year Results
Mondi Half Year Results
Infinis Energy Interim Management Statement
BATM Advanced Communications Half Year Results
Kennedy Wilson Europe Real Estate Half Year Results

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Thursday's Key Economic Events (all times British Summer Time)

00:50 Japan Foreign bond investment
07:00 Germany Industrial Production
07:45 France Trade Balance
11:00 Ireland Consumer Price Index
12:00 UK BoE Interest Rate Decision
12:45 EU ECB Interest Rate Decision
13:30 EU ECB Monetary policy statement and press conference
13:30 US Jobless Claims
15:30 US EIA Natural Gas Storage change
20:00 US Consumer Credit Change

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