British bank Standard Chartered PLC surprised the market on Wednesday by asking its shareholders for nearly 3.3 billion pounds ($5.2 billion) in a rights issue to satisfy tighter international capital requirements.
The company said it needs to be sure it has cash available for expansion after meeting the so-called Basel III rules, which are expected to raise the amount of money banks need to set aside as a buffer against potential problems.
Along with the announcement, the bank also reported a "very strong" third quarter with business volume nearly back to pre-credit crisis levels.
"We see many opportunities for growth across Asia, Africa and the Middle East as the world continues to rebalance between East and West," said Chief Executive Peter Sands.
"We are launching this rights issue to ensure that we can continue our strong record of organic growth and take full advantage of these opportunities, while at the same time being prepared for likely increases in capital requirements resulting from Basel III implementation."
The bank is offering one new ordinary share at 1,280 pence for every eight existing shares.
Standard Chartered shares were down 1.5 percent at 1,880 pence in late morning trading on the London Stock Exchange after dropping as much as 4 percent earlier in the day.
"Accelerated growth is (we believe) already in market expectations, whereas the scale of this further increase in (dilutive) capital buffers is not," wrote Ian Gordon, analyst at BNP Exane Paribas, in a note to investors.
Although he has praised Standard Chartered as "probably the best bank in the world," Gordon said that "our concerns were and remain around returns where, with ongoing margin pressures (on both sides of the balance sheet), and a bloated capital base, we see little prospect of returns on equity exceeding 15 percent in 2011/12."
He rated the shares as "underperform."
Richard Hunter, analyst at Hargreaves Lansdown Stockbrokers, said the rights issue is "understandable as a pre-emptive move ahead of potential regulatory restrictions."
He said other banks may follow suit.
Standard Chartered, which remained profitable through the credit crisis, last year raised 1 billion pounds through a share placing and $2.7 billion from a rights issue. In 2008, a rights issue raised another $1 billion.
In its interim management statement, the bank said its loan impairment charge for the third quarter was "low." The bank did not report earnings figures for the period.