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Don Weinland

So much for a quiet entrance for new Standard Chartered chief executive Bill Winters.
The former JP Morgan leader, in the job for just over two months, halved half-year dividends to 14.4 US cents from 28.8 US cents a year ago.
The clear message from Winters was that payout to investors would have to fall in line with the bank's performance - which was by all accounts, highly disappointing.
Pre-tax profit between January and June showed a precipitous drop of 44 per cent from the same period last year to US$1.8 billion, weighed down by a near doubling of impairment losses, outpacing even the most pessimistic analyst projections.
Operating income also disappointed, falling 8 per cent year on year to US$8.5 billion.
"It's still not a loss-making business," said Gary Greenwood, a banks analyst at Shore Capital Stockbrokers, noting surprise on the strong uptick in impairments. "The question is does it stay that way."
The dividend cut no doubt irked many investors. But longer-term stockholders likely had a rosier outlook on the performance, mainly because the bank managed to hit one major target well in advance.
Standard Chartered's common equity tier-1 ratio, a measure of a bank's capital strength and a growing worry, hit 11.5 per cent, up from 10.7 per cent at the end of last year. That put it well within the range of 11 to 12 per cent it had aimed to hit by the end of 2015.
The bank also showed that it had reduced risk-weighted assets by 5 per cent to US$326 billion, which helped lift the ratio.
Restoring some confidence in its balance sheet was a primary reason shares in the bank rose on Wednesday morning in London by more than 4 per cent to 992 pence (HK$12).
Slashing the dividend was one step towards building capital. Analysts and investors had long voiced concerns on the bank's weak capital position against the backdrop of a deteriorating asset quality. Winters' predecessor Peter Sands routinely pushed back on suggestions that the bank would need to boost its common equity level with a rights issue.
A rights issue was one topic Winters kept quiet on, although many analysts had speculated it would be his first major move as boss.
At a press conference in Hong Kong on Wednesday, greater China chief executive Benjamin Hung said the bank had made no decision on issuing new shares.
"If we decide we will need capital, we will raise them. If we don't, we won't," Hung said.
Raising capital in the market would be another painful move for investors. Analysts at Barclays calculated that a US$5 billion rights issue could grind down the bank's book value per share for the year by HK$13.50.
Decisions on a rights issue, the exit from other businesses, continued cutback on risk-weighted assets or re-investment into stronger businesses would not likely be announced before the end of the year, when Winters says he will deliver a "clear plan of action" for the bank. Until then, investors will hardly rest easy with the many challenges facing the bank.
Impairments on loans climbed 95 per cent year on year in the first half to US$1.65 billion. Hung said much of that deterioration was concentrated in India.
In March, the bank announced that it would target a return on equity above 10 per cent. For the first six months of the year, that measure of profitability fell to a dismal 5.4 per cent from 7.8 per cent at the end of last year, another toll of heavy impairments on loans. The view on asset quality over the second half of the year was not promising.
"It is very very difficult for us to predict the outlook on loan impairments," Hung told reporters.


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Standard Chartered cuts dividend as first-half earnings slump

China chief executive Benjamin Hung says Standard Chartered has made no decision on issuing new shares. Photo: Edward Wong

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Pre-tax profit down 44 per cent year on year to US$1.8 billion, weighed down by impairment losses as operating income falls to US$8.5 billion


Pre-tax profit at the bank between January and June drops 44 per cent from the same period last year to US$1.8 billion, weighed down by a near doubling of impairment losses. 


.css-sioo19{color:#c79a00;}New | Standard Chartered cuts dividend as first-half earnings slump

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Pre-tax profit down 44 per cent year on year to US$1.8 billion, weighed down by impairment losses as operating income falls to US$8.5 billion

New | Standard Chartered cuts dividend as first-half earnings slump

Pre-tax profit down 44 per cent year on year to US$1.8 billion, weighed down by impairment losses as operating income falls to US$8.5 billion