Standard Chartered to axe 17% of its staff
15 000 jobs to go by 2018
STANDARDChartered is to cut 17 percent of its workforce as soaring impairments add to Bill Winters’ woes, underlining the new chief executive’s challenge in restoring earnings growth as he tapped investors for $5.1 billion (R70.2bn). The shares plunged.
The bank unveiled 15 000 job losses as it seeks to save $2.9bn by 2018, according to a statement yesterday.
Standard Chartered is also to restructure or exit $100bn of assets after it reported an unexpected third-quarter loss of $139 million, compared with a profit of $1.5bn a year earlier. Winters scrapped the bank’s dividend for the second half, the first such move since at least 1988, to save about $700m.
Winters, 54, is seeking to reverse damage caused by predecessor Peter Sands’s revenue-driven expansion across emerging markets, which left the bank saddled with bad loans when commodity prices slumped and economies from China to India cooled. His fundraising plan comes as British regulators prepare a second round of stress tests next month, with some analysts predicting a capital gap of as much as $10bn.
“Poor underlying performance is the real story today, despite the strategic review,” Joseph Dickerson, an analyst at Jefferies International, said.
Not enough
“The bank has not raised enough capital in our view – today’s capital raise is the exact amount raised in 2010 – it was not enough then and is unlikely to be now.”
Standard Chartered shares fell as much as 11 percent, the most since August 2012, in London yesterday. They have dropped about 33 percent this year, making the shares the worst performer among Britain’s five largest lenders.
The sweeping job cuts, part of creating a “simplified” structure, were on a gross basis, Standard Chartered said.
The London-based lender had about 86 000 employees at the end of June.
Under former chief executive Sands, who presided over a decade of growth uninterrupted even by the global financial crisis, the bank ruled out a capital increase, instead focusing on cost cuts.
“Standard Chartered’s ability to slim down its cost base remains in question,” said Jonathan Tyce, a senior banks analyst at Bloomberg Intelligence. “The destabilising effects of restructuring and job losses could impair revenue beyond current expectations.”
Standard Chartered is seeking to bolster its capital buffer ahead of a tougher round of stress tests as the Bank of England turns its focus on mounting risks abroad. The central bank will assess the resilience of seven UK lenders against a slump in the Chinese economy, a drop in oil prices and a prolonged period of deflation.
“The timing is just about right,” Winters said, when commenting on the capital increase. The chief executive said he did not move faster, despite the shares falling 39 percent since he started on June 10, because he “didn’t want to have a half-baked strategy”, he added.
Boost
The two-for-seven rights issue offered at 465 pence per share would boost the lender’s common-equity Tier-1 capital ratio to 13.1 percent from 11.5 percent as of June 30, the bank said. Temasek Holdings, the largest shareholder, is to take up rights for 15.8 percent of the firm’s existing share capital, according to the statement.
Besides strengthening the balance sheet, the capital raising would help fund a planned $3bn investment over three years into “strategic opportunities”, technology and upgrading regulatory and compliance systems, the lender said.
On day one in the job, Winters pledged to strengthen Standard Chartered’s “financial position and re-orientate the bank for better returns on capital”. A month later, the former co-head of JPMorgan Chase’s investment bank appointed a new management team reporting directly to him to speed up cost cuts. – Bloomberg
$100bn The value of assets the bank plans to restructure or exit