Standard Chartered said it would axe 15,000 jobs and raise $5.1 billion by selling new shares as its new chief executive set out plans to restore profitability to a bank hit hard by an economic slowdown in emerging markets.
It will cut 17 per cent of the workforce to reduce costs by $2.9 billion by 2018, and sell or restructure $100 billion of loans, on a risk-adjusted basis — or a third of its total.
CEO Bill Winters, a former JPMorgan investment bank boss who took the helm of Standard Chartered in June, described this as an “aggressive and decisive set of actions” to shore up the company.
The news of the rights issue and restructuring came as Asia-focused Standard Chartered (StanChart) posted a third-quarter operating loss of $139 million, weighed down by growing global regulatory costs and rising loan impairments in India. Revenue dipped 18 per cent year-on-year.
It was the fifth successive quarter of falling revenue for StanChart, hit by an economic slowdown in Asia — where it earns more than two-thirds of its profits — and rising bad loans, as well as weakening currencies in the region compared with the dollar, in which it reports its results.
“Post restructuring and recapitalisation Standard Chartered will be a stronger and more focused group. But the group will remain a complicated work-in-progress during the upcoming years,” said Ronit Ghose, analyst at Citi.
No final dividend Mr. Winters was appointed after previous CEO Peter Sands failed to reverse the company’s fortunes with restructuring efforts that saw him axe over 4,000 staff.
The rights issue, StanChart’s first capital-raising in five years, was launched on Tuesday at a price of 465 pence per share, a 35 per cent discount to its last traded price in London. Two new shares will be issued for every seven existing shares.
StanChart said Singapore’s Temasek, the bank’s top shareholder, had indicated it intends to take up its full allocation of the issue, representing 15.8 per cent of the existing share capital.
“[There is] still a lot of hard work to put in but the path is clear,” said Hugh Young, Managing Director at Aberdeen Asset Management, the bank’s second-biggest shareholder.
The bank also said it would not pay a final dividend for this year, saving the company $700 million.
The capital-raising and asset-restructuring will together push the bank towards a new common equity Tier-1 capital ratio goal of 12-13 per cent, it said.
The bank’s current CET1 ratio — a measure of financial strength — fell slightly in the third quarter to 11.4 per cent. It will increase to 13.1 per cent after the rights issue.
Analysts had expected that Mr. Winters would wait until after Bank of England stress test on December 1 before announcing the widely-expected rights issue. StanChart said British regulators were aware of the bank’s plans and had not objected.
“The capital-raising is clearly good from our viewpoint and so is credit positive. But they have a lot of restructuring costs to get out of the way and so will need more capital to cover these,” said David Marshall, credit analyst with research firm CreditSights in Singapore.
