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The Flexibility to Increase Returns with Wealth Lending

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The Flexibility to Increase Returns with Wealth Lending

Financial flexibility, whatever your needs are

Wealth Lending facility allows you to explore new investment opportunities or increase liquidity for your personal needs

Interest Rate (%)

Rate updated on: 21st November 2024

CURRENCY
3 Month SCBLR
AED 4.43
USD 4.71
GBP 4.68
AUD 4.31
EUR 3.08
CHF 1.01
HKD 4.31
JPY 0.20
CNH 3.14

Note:

  • SCBLR – Standard Chartered Bank Lending Rate
  • The interest rates stated herein are for reference only. If you have any queries, contact your Relationship Manager.

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Wealth Lending Example

How does it work?

Mutual Fund Investment without Wealth Lending

Assuming you have $100,000 to invest in a Mutual Fund that pays a dividend of 4% per annum and achieves a capital gain of 2%:

Your annual return on capital would be $6,000.

Dividend

$4,000

4% of $100,000
+
Capital gain

$2,000

2% of 100,000
–
Annual interest

$0

Not applicable
=
Net return

$6,000

6% of 100,000

Mutual Fund Investment with Wealth Lending

With Wealth Lending, you have more capital at your disposal to invest. Assuming the invested Mutual Fund has a Loan-to-value ratio (LTV) of 70%, a credit facility of $70,000 can be secured against the Mutual Fund investment pledged (at an interest rate of 2.5% per annum, for the purpose of illustration). LTV3 is tagged to the asset.

This additional $70,000 is available to use for investing in the same Mutual Fund, for your personal financial needs or another kind of investment. Assuming the Facility is used for the same investment fund:

Scenario 1 : Your annual return on capital would be $8,450

Dividend

$6,800

4% of $170,000
+
Capital gain

$3,400

2% of 170,000
–
Annual interest

$1,750

2.5% of $70,000
=
Net return

$8,450

Scenario 2 : Your annual return on capital would be $1,650

Dividend

$6,800

4% of $170,000
–
Capital loss

$3,400

2% of $170,000
–
Annual interest

$1,750

2.5% of $70,000
=
Net return

$1,650
Subject to market conditions, Wealth Lending may increase your potential gains or magnitute of loss as compared to investing without Wealth Lending.

Leverage Financing Example

How does it work?

Mutual Fund Investment without Leverage Financing

Assuming you invested $100,000 into a Mutal Fund that pays a dividend of 4% per annum and achieves a capital gain of 2%:

Your annual return on capital would be 6%

Dividend

$4,000

4% of $100,000
+
Capital gain

$2,000

2% of $100,000
–
Annual interest

$0

Not applicable
=
Net return

$6,000

6% of $100,000

Mutual Fund Investment with Leverage Financing

Assuming the Mutual Fund Investment can be leveraged with an additional 2x, at an interest rate of 2.5% per annum, a Leverage Financing facility of $200,000 will then be used to invest in the same Mutual Fund.

Scenario 1 : Your annual return on capital would be $13,000

Dividend

$12,000

4% of $300,000
+
Capital gain

$6,000

2% of $300,000
–
Annual interest

$5,000

2.5% of $200,000
=
Net return

$13,000

Scenario 2 : Your annual return on capital would be $1,000

Dividend

$12,000

4% of $300,000
–
Capital loss

$6,000

2% of $300,000
–
Annual interest

$5,000

2.5% of $200,000
=
Net return

$1,000
Subject to market conditions, Leverage Financing may increase your potential gains or magnitute of loss as compared to investing without Leverage Financing.
You should ensure that you do not commit yourself to investments beyond your means and consider your appetite for losses before requesting for Leverage Financing.

Key Risks

  • Leverage risks

    Depending on market conditions, the value of investments held as collateral may fall. You may then be called upon to “Top Up” your account by substantial amounts, or to repay your outstanding credit facilities at short notice. If you fail to do so, the Bank may have to liquidiate your collateral at a loss to repay any amount outstanding. You would remain liable for any amounts still outstanding.

  • Interest rate risks

    The interest rate of the credit facility may increase, resulting in a higher interest payment amount for the Facility. An increased interest rate will reduce the return on any investment.

  • Foreign exchange risks

    The credit facilities may be subject to additional foreign exchange risks, if they are taken in a different currency to that of your collateral. If the exchange rate moves against you, the repayment amount of the Facility may be affected.

  • Change in credit Loan-to-Value (LTV) ratio

    LTV ratios are subject to periodic review and may change within a short period of time. If the LTV of your collateral is reduced, you will need to have sufficient liquidity to repay your outstanding credit loan, or pledge additional collateral as security for the Facility.

  • Risk of Leverage Financing

    In addition to the non exhaustive risks of Wealth Lending, Leverage Financing carries the below risk Magnified risks While Wealth Lending with Leverage Financing can amplify potential investment earnings, it can also magnify potential losses. You could even sustain losses that exceed the value of the original investment amount and the value of your collateral. You should ensure that you do not commit yourself to investments beyond your means and consider your appetite for losses before requesting for Leverage Financing.

  • Mitigating the risks of Margin Triggers

    Balance the risk and return of your portfolio, and better manage the possibility of an “Informative Breach”, “Top-up/Margin call” or “Sell down” Triggers by:
    Limiting the use of your credit facility to ensure that you do not commit yourself to investments beyond your measures.
    Maintaining a steady income stream independent of the collateral to utilize at short notice for a Margin call.
    Diversifying your investment portfolio.
    Servicing your interest charges regularly

Term And Conditions

Important Notes

1It is important to note that this will also magnify any losses.

2The bank reserves the right to add or remove loan currencies.

3The LTVs are indicative only and are subject to immediate change by the Bank at its sole discretion. Your available credit limit under this facility will be determined based on a range of factors such as the type of financial assets you use as a security pegged together with its prevailing market value and the concentration of the financial assets within your portfolio held with the Bank. The credit limit available to a Borrower is subject to the Bank’s internal assessment and valuation, and may be reviewed from time to time.

 

Disclaimer

Standard Chartered UAE is licensed by the Central Bank of the U.A.E.
Standard Chartered Bank UAE is licensed by Securities and Commodities Authority (SCA) to practice Promotion Activity.

Information on this webpage is for reference and general information only and it does not constitute an offer, recommendation, solicitation to enter into any transaction or adopt any hedging, trading or investment strategy, in relation to any securities or other financial instruments. The content on this webpage has not been prepared for any particular person or class of persons and does not constitute and should not be construed as investment advice nor an investment recommendation. It has been prepared without regard to the specific investment objectives, financial situation or particular needs of any particular person.  Investments carry risk and values may go up as well as down. You should be aware that your investment(s) can be negatively affected by foreign exchange risk if your holdings are denominated in foreign currencies.