Standard Chartered considers a simpler structure to control costs, will reveal plan with full-year result in February
- London-based bank exploring how to free up liquidity and reduce funding expenses within its different legal entities
- Lender makes bulk of its income from its China and North Asia businesses
Standard Chartered Bank is weighing a plan to simplify its structure as the emerging markets lender looks to control costs across a sprawling network that stretches from Zambia to Macau, said people familiar with the matter.
The London-based bank, which operates in about 60 markets, is exploring how to free up liquidity and reduce funding expenses within its different legal entities, the people said, asking not to be identified as the details are private.
Standard Chartered said in a statement to Bloomberg it will outline how it plans to “deliver higher returns” when it reports its full-year results in February, without elaborating on the details. The lender is expected to unveil a strategic review to address investor concerns about rising expenses and an about 40 per cent decline in its share price since Bill Winters became chief executive in June 2015.
Winters is still seeking to convince investors he can revive longer-term earnings growth and generate an acceptable level of profitability while cutting costs. He has spent much of his tenure cleaning up the balance sheet and culture at the bank, which has been saddled with bad loans.
As part of the review to be announced in February, the bank is also considering cutting the number of senior posts, one of the people said. The bank had around 86,000 staff members at the end of last year, up from about 84,000 in 2015. It is also still pressing ahead with the creation of two Asian hubs, one based in Singapore and another in Hong Kong, they said.
Meanwhile, the lender is also reviewing its African businesses and may opt to focus on some core countries, the people said. Standard Chartered operates across a vast network in Africa, including smaller economies such as Sierra Leone, Ivory Coast and Cameroon, according to its website. The bank makes the bulk of its income from its China and North Asia businesses.
As part of the review, the bank is also closely examining part of its private bank. It plans to keep its focus on the wealth-management segment, the people said.
Standard Chartered’s Winters said in October the lender was working on a three-year plan to improve performance. Its return on equity was 6.6 per cent as of the third quarter. The bank said earlier in the year that 8 per cent was achievable in the medium term.
Details of its plan are still to be finalised as the lender is waiting to hear from the Department of Justice over a potential fine related to previous Iranian sanctions imposed by the US.
The bank has said it continues to cooperate with US authorities on resolving the Iran sanctions inquiry, and that it is too early to provision for any fine. Bloomberg News earlier reported the bank was bracing for a potential penalty of about US$1.5 billion for allowing customers to violate the sanctions.
Any plan to reward shareholders with a buy-back, which was reported by the Financial Times this month, is likely to be put on hold until there is a settlement with US prosecutors, the people said.
Standard Chartered’s underlying profit was US$1.07 billion in the third quarter, ahead of a consensus estimate of US$976 million, as the bank managed to squeeze out more growth from Asian markets.