* 2013 pretax profit down 7 pct to $7 billion
* Says no need to raise capital, core ratios beat f'casts
* Cuts bonus pool 15 pct, CEO bonus down 21 pct
* First half will be challenged, sees modest growth in 2014
* Shares up 0.1 pct on relief over capital, dividend
(Adds CEO comments, details)
By Steve Slater and Matt Scuffham
LONDON, March 5 Standard Chartered Plc
reassured investors about its capital strength on Wednesday,
raising its dividend despite reporting its first drop in annual
profits for a decade and giving a weak outlook for the first
Once feted for its exposure to Asia which helped generate
years of record earnings, StanChart is now under pressure to
show it can adapt to slowing growth and rising bad loans.
The bank said after a challenging year it had cut its bonus
pool by 15 percent to $1.2 billion, with Chief Executive Peter
Sands' own bonus down 21 percent to $2.5 million.
It plans to introduce an allowance for hundreds of senior
staff this year, which will effectively increase their fixed pay
and reduce their bonuses, to meet EU rules that will cap
variable pay at 200 percent of fixed salaries.
The bank warned volatile trading conditions would hurt
income and profits in the first half, but its shares were lifted
by a 2 percent increase in the dividend and a
bigger-than-expected cushion against future losses which
reinforced the bank's message that it did not have to raise
"Today's results are showing that Standard Chartered is
challenged ... It's not giving a particularly bright outlook, it
is talking about modest growth markets and volatility and still
having to deal with problems in Korea, but the one thing that
has been put to bed for the time being is worries about capital
and hence dividends," said Christopher Wheeler, analyst at
The bank estimated its common equity Tier 1 ratio, a key
measure of financial strength, was 11.2 percent under tough new
global rules, above estimates of near 10.5 percent.
"At the level we're at ... we are already significantly and
materially ahead of the target ratios the PRA (Prudential
Regulation Authority) has guided us to achieve by 2019," Sands
told Reuters, referring to requirements by the UK regulator.
Asked whether he had any plans to raise capital or cut its
dividend, he said: "None".
StanChart shares were up 0.1 percent, having earlier jumped
over 4 percent. The stock tumbled 28 percent in the last year,
compared with a 19 percent rally by European banks as a
whole, and fell this week to near its lowest of the year.
KOREA WOES CONTINUE
The bank, which makes 90 percent of its profit in Asia, the
Middle East and Africa, reported a 7 percent fall in underlying
annual pretax profit to $7 billion. It had warned in December
profits would fall due to losses in Korea, weak investment
banking income and a slowdown in Asian economic growth.
Revenue was flat and provisions for bad debts jumped by a
third to $1.6 billion. The full-year dividend payout will rise
to 86 cents per share.
The bank said it was still an "exciting growth story" but
admitted that growing income by at least 10 percent a year, once
a consistent achievement, was now a long-term aspiration.
Market volatility is expected to hit income and profits in
the first half of this year and Sands said he expects modest
growth in income, profits and loans in 2014. "Market sentiment
towards emerging markets is clearly much more negative and jumpy
than it was this time last year," he said.
Having ridden the wave of cheap credit that poured into
emerging markets for the past decade, StanChart is now cutting
back as foreign money pulls out. It cut 2,000 jobs last year and
will sell some smaller businesses.
Sands confirmed the bank was seeking buyers for a Hong Kong
consumer finance business, which sources told Reuters last month
was valued at between $500 million and $700 million.
He said the sale process was at an early stage.
It is also selling consumer finance and savings units in
Korea, where it took a $1 billion writedown last year after
lenders there were forced to write off personal loans.
The bank swung to a $13 million loss in Korea last year from
a $514 million profit a year before, is shrinking loans and has
cut 400 jobs and 65 branches there.
"There's no silver bullet to improving the performance of
our business in Korea," Sands said.
In contrast, profits in Hong Kong, its biggest market,
jumped 16 percent to $1.9 billion, or 28 percent of the total.
Sands is streamlining and reorganising his bank to combat
the new era of lower growth and to "refresh and sharpen" its
strategy to better serve some sectors and product groups and
($1 = 0.5998 British pounds)
(Writing by Carmel Crimmins; Editing by David Holmes)