StanChart's Investors Should Be Careful What They Wish For

04 Mar 2020, 07:12 AM IST

(Bloomberg Opinion) -- Standard Chartered Plc investors should be careful what they wish for.

Shares in the emerging markets lender rose on Tuesday after Bloomberg News reported that Chairman Jose Vinals has informally approached banking executives to gauge interest in replacing Chief Executive Officer Bill Winters, who’s about to complete five years at the Asia-focused bank. StanChart responded to the story by saying it would like to retain Winters for “as long as possible” and described the meetings with outside candidates as normal succession planning.

Investors have plenty of reasons to want a new boss. Winters picked a churlish fight with some of them last year over his pay, calling them “immature,” even when his steering of the bank didn’t exactly justify the compensation. StanChart recently delayed its target of a 10% return on tangible equity to beyond 2021 after delivering just 6.4% last year, 2 percentage points lower than larger rival HSBC Holdings Plc.

Still, viewed from coronavirus-hit Hong Kong — StanChart’s biggest market — you’d have to ask whether 2020 is really the right year for making big changes at the top. This isn’t 2015, when Winters was brought in to deal with a big bad loan problem. Now banks are grappling with low interest rates and the impact of the virus. A steady ship is critical.

StanChart’s main task this year will be to lift profitability through stricter cost controls. Maybe a new CEO could cut thousands of jobs, as HSBC’s interim boss Noel Quinn is doing. But a similar axing of headcount might look like overkill if the outbreak doesn’t last much longer. The bank is midway through the launch of an internet bank to attract millennial and Generation Z savers in Hong Kong, where its customers are getting old. Why jeopardize that?

True, StanChart’s $500 million buyback was less than investors expected last week, but the sale of Indonesia’s PT Bank Permata should release the capital needed to return some more to investors.

Besides, where exactly is Vinals going to find this new CEO? Europe’s biggest banks are already struggling to fill their own posts, and there’s hardly a surfeit of talent out there. Neither are decent executives falling over themselves to work for bigger lenders; look at Jean Pierre Mustier’s snub of HSBC in favor of staying with Italy’s UniCredit SpA.

If Vinals could land someone like Piyush Gupta, CEO of Singapore’s DBS Group Holdings Ltd., then investors would have cause to celebrate. The head of Singapore’s largest bank has won accolades for digitizing the lender, a holy grail for the finance industry. But would Gupta really consider the job unless Singapore’s state investment firm Temasek Holdings Pte. — the largest shareholder of both StanChart and DBS — saw value in combining the two banks? Such a merger, as far as we know, isn’t on the cards.

A mediocre StanChart may frustrate investors; an unstable one would hurt them even more.

To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.