Standard Chartered said it was working on a new strategic plan that would mean further job cuts as it tries to boost financial performance in response to shareholder frustration over the bank’s sluggish turnround efforts.
The emerging markets-focused lender said its franchise was “capable of much more” and that it was preparing a string of measures to “become a simpler, faster and more sustainably profitable bank”.
Investors reacted positively to the impending shift in strategy, with shares in the group jumping by as much as 5.91 per cent in early trading in London. However, the bank’s stock price is still down by 28 per cent this year.
The plan — which will be published alongside full-year earnings in February — comes as StanChart struggles to deliver the rapid improvement in profitability promised by Bill Winters when he became chief executive more than three years ago.
Andy Halford, chief financial officer, signalled that the shift in strategy would mean further job losses at StanChart, which has been shedding staff continuously as part of a three-year turnround effort.
“Nothing is off the table . . . obviously there will be some impact on people,” said Mr Halford, who added that any headcount reductions would be managed “thoughtfully and carefully”.
Earlier this month, the Financial Times reported the bank was planning a fresh round of redundancies, including in Africa and the Middle East, where recent performance has been poor.
Mr Halford said that the February plan would be an “evolution” of the current strategy “rather than a complete rebase” and that it would free up capital to invest in areas such as digital innovation.
“As part of running any global business, particularly one that spans as many countries as ours, there is going to be constant evolution from certain areas into others,” he said.
The renewed push is intended to boost the bank’s return on equity, which was 6.1 per cent in the first nine months of the year — well below the bank’s medium-term target of 8 per cent. On Wednesday, StanChart said it “remains confident” it can achieve returns in excess of 10 per cent.
Earlier this month, one large investor told the FT that return on equity at the bank had been “bloody slow to come up”.
StanChart revealed little of the new plan on Wednesday, but hinted that it would exit some underperforming businesses. “We have learnt a lot about where we are — and where we are not — differentiated, [and] what our clients want from us,” the bank said in a statement.
Earlier this month, analysts at Autonomous, the research group, published a note calling for the bank to restructure or sell underperforming parts of its retail network, while also selling its asset finance business and 45 per cent stake in Permata, the Indonesian lender.
The bank announced the forthcoming plan as it reported a pre-tax profit of $1.1bn for the third quarter, an increase of 37 per cent compared with last year. The improvement in profitability was mostly driven by lower impairments on loans to customers and a smaller restructuring charge, rather than stronger underlying performance.
Joseph Dickerson, an analyst at Jefferies, noted the bank’s net interest margin — the difference between what it pays on deposits and earns on lending — was “flatlining”, standing at 1.58 per cent in the first nine months of the year versus 1.59 per cent in the first half.
A strong performance in China and Hong Kong was offset by poor trading in Africa and the Middle East: operating income in the region — which accounts for almost a fifth of revenues — was down by 14 per cent in the third quarter.
The bank’s common equity tier one ratio — a key measure of balance sheet strength — increased to 14.5 per cent at the end of September, from 13.6 per cent a year earlier.
Additional reporting by Edward White in Taipei
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