What's going on?

Standard Chartered, the emerging markets-focused bank, said it was going to raise more money from shareholders (referred to as capital raise). In fact, a lot more money: $5.1 billion!

What does this mean?

It means that the existing shareholders will either be diluted (meaning they will own proportionally less of the company) or, in order to maintain their ownership percentage, they will have to buy new stock. Unsurprisingly, shares were down significantly as a result of the news (about -7%). It wasn�t all bad though � the capital raise was accompanied by the announcement of a new plan to improve profits going forward. The CEO said Standard Chartered would stop serving unprofitable corporate clients, cut costs (by letting go of employees) and refocus on the bank�s retail- and private-banking�businesses. Like many other banks, it is shying away from riskier investment banking activities.

Why should I care?

The bigger picture: Standard Chartered has been badly hurt by slowing emerging markets (EM). The bank experienced soaring profit growth as EM economies grew but it lent too much money to too many risky companies. As the downturn hit, those risky loans weren�t all paid back and Standard Chartered lost lots of money. 2. For the stock: Is the capital raise big enough? It�s rarely clear, especially with banks, whether a capital raise is big enough. Standard Chartered raised a similar amount from shareholders back in 2010 and, at the time, investors wouldn�t have expected them to have to come back for more funds later. It will have to execute well on its turnaround plan and probably get some help from the macro environment if this capital raise is to prove decisive. �