Stan­dard Char­tered slashes div­i­dend on slump

The China Post - - WORLD BUSINESS -

Asia-fo­cused Bri­tish bank Stan­dard Char­tered slashed div­i­dends by 50 per­cent on Wed­nes­day af­ter prof­its plunged in the first half of the year, its first re­sult un­der new lead­er­ship as it strug­gles to re­turn to growth.

Net profit slumped 36.7 per­cent in the six months to June com­pared to the same pe­riod in 2014, with pre-tax prof­its nose­div­ing 44 per­cent.

Share­holder div­i­dends were cut by half from 28.8 U.S. cents per share to 14.4 U.S. cents per share.

Group CEO Bill Win­ters, for­mer co-head at JP Mor­gan, took the reins from Peter Sands in June af­ter share­holder calls for a board­room cull fol­low­ing profit warn­ings.

Last month Win­ters ap­pointed a new man­age­ment team re­port­ing di­rectly to him as he tries to cut costs and im­prove per­for­mance.

But there was lit­tle cheer in the first-half re­sults.

“We have de­liv­ered good progress on our tar­get of strength­en­ing the group’s cap­i­tal ra­tio and will con­tinue to do so,” said chair­man John Peace in a state­ment to the Hong Kong stock ex­change.

“How­ever, these ac­tions have also im­pacted our re­turn on eq­uity, and com­bined with a dis­ap­point­ing earn­ings per­for­mance and the cur­rent near-term out­look for the group, the board has de­cided to re­duce the div­i­dend by 50 per­cent,” he said.

Win­ters said the bank some “very real chal­lenges.”

“But they are fix­able and it is im­por­tant to re­mem­ber that there is a strong busi­ness at the heart of the group,” he said.

Net profit dropped from US$2.31 bil­lion to US$1.46 bil­lion, with ad­justed profit be­fore tax down from US$3.27 bil­lion to US$1.82 bil­lion.

Rev­enues were down eight per­cent while im­pair­ment losses on loans al­most dou­bled.

An­a­lysts said although the div­i­dend cut was sharp, in­vestors would be pleased the bank had not taken more dras­tic cap­i­tal

faced rais­ing mea­sures.

“The over­all re­sult is short of ex­pec­ta­tions. As an in­ter­na­tional bank, it isn’t run­ning as smoothly (as it should),” said Jack­son Wong, as­so­ciate di­rec­tor for Sim­sen Fi­nan­cial Group.

But he added: “No cap­i­tal rais­ing plan is wel­comed by share­hold­ers. In­vestors are hold­ing on for Bill Win­ters to take the bank to a new di­rec­tion.”

‘Not good news’

Oth­ers said the div­i­dend would af­fect sen­ti­ment.

“They are keep­ing the cash close to their chest. It’s not good news. Peo­ple don’t like div­i­dend cuts,” said an­a­lyst Fran­cis Lun.

“Stan­dard Char­tered is still fac­ing a chal­leng­ing en­vi­ron­ment in the sec­ond half.”

Shares in the bank were up 0.7 per­cent in morn­ing trad­ing in Lon­don.

Stan­dard Char­tered sur­vived the 2008 global fi­nan­cial cri­sis with­out state as­sis­tance, un­like

cut many of its peers.

How­ever it has suf­fered in re­cent times from a growth slow­down in emerg­ing mar­ket economies in Asia, Africa and the Mid­dle East, the re­gions from which it makes about 90 per­cent of its prof­its.

In 2014 it was also hit by a US$300 mil­lion fine from New York state’s bank­ing reg­u­la­tor for fail­ing to de­tect pos­si­ble money-laun­der­ing.

That came two years af­ter it had paid U.S. reg­u­la­tors US$667 mil­lion to set­tle charges that it vi­o­lated U.S. sanc­tions by han­dling thou­sands of trans­ac­tions in­volv­ing Iran, Myan­mar, Libya and Su­dan.

The bank’s net profit fell by 37 per­cent in 2014, the sec­ond con­sec­u­tive year of de­cline, prompt­ing bosses to an­nounce in March this year that they would forgo their bonuses.

Stan­dard Char­tered said in Jan­uary it would axe 2,000 jobs around the world in 2015 as it tries to make sav­ings of US$400 mil­lion in a struc­tural over­haul.

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