StanChart rules out share sale as profit plunges 30 per cent

LONDON — Asia-focused Standard Chartered, the bank that is undertaking one of its biggest-ever management overhauls to help reverse faltering earnings, said yesterday that it had no plans to tap shareholders for cash, despite reporting a 30 per cent slide in full-year profit on the back of soaring bad loans.

The British bank, whose largest shareholder is Temasek, said it was eschewing “knee-jerk actions” and vowed to cut costs and shrink its loan book in an effort to quell concerns about its capital strength, throwing down the gauntlet to incoming chief Bill Winters.

The bank is bracing itself for a strategic revamp when the former investment banker takes over as chief executive in June, with many expecting him to launch a multibillion-pound rights issue to reboot capital after a prolonged slump in profits.

A decade-long run of record profits came to a screeching halt in 2013 as Asia’s credit binge turned sour. Pre-tax profit was US$4.2 billion (S$5.7 billion), down from US$6.1 billion a year earlier, StanChart said yesterday.

That missed the US$5.6 billion average estimate by analysts in a Bloomberg survey. The bank held its dividend at 86 cents a share.

StanChart said impairments for loans and other credit risks jumped 33 per cent to US$2.14 billion last year. It also took a US$726 million goodwill impairment, a non-cash charge, related to its Korean business, after a US$1 billion write-down the year before.

Outgoing CEO Peter Sands described last year as a perfect storm of falling commodity prices, persistent low interest rates and negative sentiment towards emerging markets.

“We saw intense pressure on margins and volume, a significant uptick in impairment and a sharp increase in regulatory-related cost,” he said. “Some of the decisions we took in the past look less good now than they did at the time.”

The bank said it was targeting cost reductions of US$1.8 billion over the next three years and would cut another 2,000 jobs in its retail operations this year and further reduce the risk in its loan portfolios and business lines. The lender slashed 2,000 jobs in its retail operations in 2014.

StanChart also disposed of 15 underperforming and non-strategic businesses, or is in the process of exiting them.

The results mark a final bow for Mr Sands after more than eight years as chief executive, his last as the longest-serving boss of any major European bank.

Under his tenure, total assets at the lender grew to US$690 billion last June from US$266 billion in 2006, Bloomberg data showed.

“I’m clearly disappointed with our performance in 2014 and take responsibility for that as the CEO in the sense that the buck stops here,” he said.

Executive directors on the bank’s board waived their bonuses this year, citing the “disappointing performance” of the company. StanChart’s overall bonus pool shrank 9 per cent for the year. Agencies