Pedestrians walk past a Standard Chartered Plc bank branch in Hong Kong, China, on Tuesday, July 31, 2018. Standard Chartered, one of the biggest financiers of global trade, isn’t losing sleep over an increasingly fractious relationship between the world’s two largest economies. Photographer: Anthony Kwan/Bloomberg
Analysts and investors believe Standard Chartered would be able to afford a buyback of at least £1bn © Bloomberg

Standard Chartered, the emerging markets bank, is drawing up plans to buy back shares for the first time in a generation as management tries to revive the lender’s flagging share price.

The buyback plan, which could be announced alongside full-year results at the end of February, represents a significant shift in the direction of the bank, which has raised billions of pounds from investors in the past decade to fund its growth. 

The proposal is still in its infancy and is contingent on the size of any fine the bank must pay to settle allegations by US authorities that it breached sanctions against Iran, according to several people familiar with the plans. 

Given the sensitivity of the negotiations over the penalty, management are reluctant to put a figure on the scale of any potential buyback, according to a person briefed on the plans. 

However, analysts and investors believe that Standard Chartered would easily be able to afford a buyback of at least £1bn, which could help drive up the company’s share price and its return on equity, a key measure of profitability. 

Gary Greenwood, banks analyst at Shore Capital, estimated in a note published this month that the bank was operating with about £3.1bn of surplus capital. 

One person briefed on the proposal said that any buyback would represent a “disciplined approach to capital allocation” that would balance shareholder returns with the need to preserve capital for the pursuit of new business. 

The person said that a buyback would show that management is serious on boosting the company’s stock price and improving shareholder returns

Bill Winters, chief executive of Standard Chartered, has pledged to achieve a return on equity of 10 per cent in the medium term, well above the 6.1 per cent the bank returned in the first nine months of the year. 

Some large shareholders have been pressing for a capital return for some time, pointing to tepid revenue growth and the fact the bank is operating with more capital than regulators say it needs, according to several big investors. 

However, other stockholders believe a buyback could be interpreted as an admission of defeat and a sign that the bank is struggling to win new business despite its position in fast-growing emerging markets. 

FILE: Bill Winters, chief executive officer of Standard Chartered Plc., speaks at the Singapore Summit 2016 in Singapore, on Saturday, Sept. 17, 2016. Deutsche Bank AG is considering candidates to potentially replace Chief Executive Officer John Cryan amid heightened tensions between him and Supervisory Board Chairman Paul Achleitner, the Times of London reported without saying where it got the information. The bank approached Richard Gnodde, the head of Goldman Sachs Group Inc.’s international operations, but he’s thought to have spurned the overture, the newspaper said. Deutsche Bank also considered UniCredit SpA CEO Jean Pierre Mustier and Standard Chartered Plc CEO Winters, according to the report. Our editors select the best archive images for the Deutsche story. Photographer: SeongJoon Cho/Bloomberg
Chief executive Bill Winters has pledged a return on equity of 10% in the medium term © Bloomberg

“What is the point of owning Standard Chartered if it’s not a growth story?” asked one large shareholder. 

Standard Chartered has not bought back any shares since 2002, when it repurchased preference shares, and the bank has not bought back ordinary stock for at least 20 years. 

The capital return plan comes as several UK banks consider instigating or increasing share buybacks as they recover from the financial crisis. 

Lloyds is planning to double its share buyback to £2bn next year, according to people familiar with the proposal, while RBS is in talks with the Bank of England about launching a buyback as part of its reprivatisation.

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