Standard Chartered, the Asia-focused London-headquartered bank, slashed dividends for the first half of the financial year as profits plummeted as it faced among other things a slowdown in emerging markets, and increased loan impairments in India and in commodities.
However, after an initial tumble, the company’s share price rose in afternoon trading in London, as the company left the question of capital raising open, and new Chief Executive Bill Winters outlined his vision for the bank going forward.
“These results underline the fact that we need to kick start our performance, reduce costs, slash bureaucracy, improve accountability and improve decision making,” Winters, the former head of investment banking at JP Morgan who took over as Standard Chartered CEO in June, told investors at a conference in London following the publication of results for the six months ending June, that showed a 44 per cent fall in pre-tax profits to $1.8 billion, against the same period the year before.
The half year dividend was slashed by 50 per cent to 14.4 cents per share, reflecting the group’s outlook, and is guiding that full year dividend will also be halved.
“The decision to rebase has not been taken lightly,” Chairman John Peace said. “We are acutely aware of the importance of dividend to our shareholders but it is critical that it is set at a level that is sustainable and reflects the lower earnings expectations of the group.” After a series of disappointing performance in recent years, and investor pressure for change, Winters was brought in to reassess and revamp strategy. The bank had in the past focused too much on growth and not enough on returns, Winters told investors on Wednesday — an issue he said he planned to tackle going forward, as the bank continued to de-risk, shed core assets and examine the returns on all its existing businesses — none of which would be exempt from scrutiny. “There are no sacred cows,” he said.
Winters also made it clear that the bank was yet to take a call on whether or not fresh capital needed to be raised. “If we decide we need capital for the long term benefit of the group we will raise capital. If we decide we don’t need it we won’t,” he said.
Cautious outlookHowever, the bank remains cautious in its short-term outlook, warning that many of the negative trends seen in the first half of the year were likely to remain, even as the group continue to sharpen its focus and organisational structure. In the first half, total impairments nearly doubled from $846 million to $1.65 billion, which the bank attribute to India, commodities, and an isolated incident in its private banking division.
“In India, we saw a number of changes in regulations early in the year and the attitude of local banks to refinancing, which has reduced the likelihood of success of some of our local corporate debt recoveries,” Group Finance Director Andrew Halford told investors.