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The end of an era at Standard Chartered?

Wednesday, March 04, 2015 - 02:16

Standard Chartered rules out plans to raise capital despite reporting a 25 percent slide in annual pretax profits. As Hayley Platt reports the drop was on the back of soaring bad loans.

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A blow that was not unexpected - the appointment of a new CEO last week suggested things weren't going too well at Standard Chartered. Former investment banker Bill Winters will certainly have his work cut out when he takes over in June. Annual pretax profit at the Asia-focused bank was down 25% - the underlying figure of $5.2 billion largely due to soaring bad loans. Gemma Godfrey is an Investment Manager at Brooks Macdonald. (SOUNDBITE) (English) GEMMA GODFREY, INVESTMENT MANAGER, BROOKS MACDONALD, SAYING: "They've transformed from a bank which has benefitted and was prized for its emerging markets exposure to one that's being punished for it and the reason was because of the fall in the oil price and fall in commodity prices in general, the loans they have on their books to loan to these companies to produce commodities are worth less than they were before." The current bosses say they'll be no knee-jerk reactions like share sales. Instead the bank will cut costs and shrink its loan book to boost capital strength. (SOUNDBITE) (English) GEMMA GODFREY, INVESTMENT MANAGER, BROOKS MACDONALD, SAYING: "You're starting to see the bank close a lot of the branches between 80-100 branches in emerging markets. What you're seeing is it is transitioning and it is restructuring. You've got high regulation costs, higher restructuring costs, in particular a redundancy payout to their Korean outfit which really hit their books. But what they're hoping is, this will make it a stronger bank going forward." Standard Chartered's shares rose more than 5 percent after the news - their highest since October. The bank's now seen an 11 percent stock price increase since a purge of top brass. It included veteran CEO Peter Sands, along with three non-executive directors and the bank's Asia head. Chairman John Peace will also step down - management's failure to deal quickly with the bank's problems has been an issue. Standard Chartered is not the only bank seeing falling profits of course. But the sudden change of fortunes has surprised many. Up until 2013 Asia's credit binge had fuelled record profits at the bank for a decade. As China, India and commodities firms deal with a new world so too must Standard Chartered. Some think that may include a rights issue once the current bosses move on.

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The end of an era at Standard Chartered?

Wednesday, March 04, 2015 - 02:16