LONDON: Standard Chartered CEO Bill Winters branded its income and profit unacceptable on Tuesday as below-forecast third quarter results and confirmation of a Hong Kong investigation underlined the challenges his overhaul faces.
“We now have a stronger balance sheet...but income and profit levels are not yet acceptable,” Winters said after the Asia-focused bank generated income of $3.47 billion in July to September, down 6 percent from $3.68 billion from a year ago.
Rivals more focused on the US and Europe have reaped huge trading profits and although StanChart’s third quarter underlying pretax profits were $458 million compared with a $139 million loss last year, this failed to offset investor disappointment with the fall in income.
Standard Charted “is delivering pretty close to zero growth. Not what investors expect when investing in emerging markets,” Nicholas Hyett, Equity Analyst at Hargreaves Lansdown, said.
StanChart’s shares were trading 5.6 percent lower at 1015 GMT, the worst performing stock in the benchmark FTSE 100 index, as the bank also confirmed Hong Kong’s financial regulator planned to take action against it in relation to its role as a joint sponsor of an initial public offering in 2009.
This comes days after Swiss bank UBS said Hong Kong’s Securities and Futures Commission was investigating its role in certain unnamed stock market listings.
RESTRUCTURING
Since joining the bank in June last year, former JPMorgan investment banker Winters has announced plans to axe more than 15,000 jobs, closed the bank’s stock trading business and raised $5.1 billion in capital to restore profitability.
The efforts have paid off for StanChart’s bottom line, and the third quarter result marks a second consecutive quarter of profit after it swung to an annual loss for 2015, when it was hit by the costs of revamping its management team and exiting out-of-favor markets. But while it has successfully cut costs, the moves have also hit revenues, prompting the bank to defer its goal to reach a return on equity of 8 percent by 2018.
The lender scrapped its dividend and launched a $5 billion rights issue a year ago in order to bolster its common equity capital level, which stands at 13 percent.
Chief Financial Officer Andy Halford said the bank would assess whether to restore the dividend before the full-year results in February, but there were many uncertainties.
Halford also said he did not expect any large loan writebacks in India, following media reports that StanChart could release a $100 million provision covering losses from loans to steel-to power conglomerate Essar Global.
The bank’s Financial Markets business posted third quarter income of $714 million, up 11 percent from $645 million a year ago but nevertheless what Winters called “a disproportionately low share of the benefits” compared with the outsized income boosts of more than 50 percent seen at some US banks.
StanChart revealed a further $30 million loss in its principal finance unit for the quarter, following a $167 million loss in its fiscal first-half and reports it was looking to spin out the private equity business housed in that unit.