StanChart's Hotly Awaited Review Gets Muted Response

(Bloomberg) -- A long-awaited plan from Standard Chartered Plc to cut costs and refine the emerging market lender’s geographic network fell flat.

The bank said on Tuesday it’s aiming to save $700 million as part of a new three-year plan that it hopes will soothe concerns over lackluster returns. The strategy announcement also unveiled moves to restructure in India, United Arab Emirates, Indonesia and South Korea. Standard Chartered shares traded 2.8 percent lower by 10:35 a.m. in London trading.

“We had some dark days, and we felt them very acutely,” said Chief Executive Officer Bill Winters on a call with analysts.

Winters has been trying to show that he can revive longer-term earnings growth, though success will in part depend on how well he restructures operations. The share price has fallen around 41 percent since he took the helm in mid-2015. The bank, which has annual operating costs of $10.5 billion, missed full-year profit targets, but signaled it expects to return capital to shareholders and deliver returns on tangible equity above 10 percent by 2021.

Here Are the Four Markets Dragging on StanChart’s Turnaround

Among the other targets announced by the bank:

• Target CET1 ratio range of between 13 and 14 percent
• Ordinary dividend per share has the potential to double by 2021
• Income growth of 5 to 7 percent

“We continue to believe that the revenue target is a challenge, particularly given commentary that 2019 has started down on 2018,” said analysts including Joseph Dickerson at Jefferies International Ltd.

Standard Chartered’s underlying pretax profit in 2018 rose 28 percent to $3.86 billion, compared with a $3.98 billion consensus forecast compiled by the bank. Underlying operating income rose 5 percent to $14.97 billion, compared with forecasts of $15.02 billion.

The lender, which operates in 60 geographies, plans to “eliminate residual drags on returns from low-returning markets,” including India, South Korea, the United Arab Emirates and Indonesia, it said. Winters also said that its plans could include partnering with technology and e-commerce firms for retail banking.

The joint venture investment in Indonesia’s PT Bank Permata Tbk is no longer core, the bank said in its statement, signaling Winters may be preparing to dispose the stake.

The British lender said last week it’s taking a $900 million charge for the fourth-quarter to cover potential U.S. and U.K. penalties, including a 102 million pound ($133 million) fine from the British financial regulator related to its financial crime controls.

“I feel like we’re through the really hard restructuring that we needed to do to get the bank clean,” Winters said in an interview with Bloomberg Television. “But, we know we have to take the next step to complete our journey to a 10 percent-plus return.”

--With assistance from Francine Lacqua.

To contact the reporters on this story: Harry Wilson in London at hwilson57@bloomberg.net;Alfred Liu in Hong Kong at aliu226@bloomberg.net

To contact the editors responsible for this story: Ambereen Choudhury at achoudhury@bloomberg.net, Marion Dakers, Christian Baumgaertel

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