Standard Chartered CEO Cuts Bonuses and Reassures on Capital

Standard Chartered Plc (STAN) Chief Executive Officer Peter Sands cut bonuses and reassured investors capital levels can weather writedowns, boosting the stock after the bank’s first annual profit drop in a decade. The lender, which makes three-quarters of its earnings in Asia, said today that pretax profit declined 12 percent to $6.06 billion for 2013, including a previously announced $1 billion writedown of its Korean unit. The London-based bank raised its dividend 2 percent to 86 cents a share. Sands, 52, whose bonus declined by 21 percent, said on a conference call that the company has a “very strong balance sheet.” Across the firm, Standard Chartered reduced its bonus pool 15 percent to 772 million pounds ($1.3 billion) and said it paid about twice as much in dividends as it did in bonuses. The bank forecast “modest growth” in 2014, though revenue and profit in the first half will be “challenged.” “There’s a degree of relief on their capital position,” said Julian Chillingworth, who oversees about 22 billion pounds as chief investment officer at Rathbone Brothers Plc in London, including Standard Chartered shares. “The outlook is relatively cautious, but that’s already been factored in the share price.”

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The shares climbed as much as 4.4 percent, the most since July, and were up 1.8 percent to 1,298 pence at 10:30 a.m. in London. Before today, the stock had fallen 31 percent in the past 12 months, the biggest decliner among Britain’s five largest banks.

Potential Sale

Standard Chartered may sell its consumer finance unit inHong Kong, Sands also told reporters on the conference call. The company said its core Tier 1 capital ratio, a measure of financial strength, rose to 11.8 percent compared with 11.7 percent a year earlier. Under full Basel III regulations, the ratio is 11.2 percent, Standard Chartered said. “Their capital position is much stronger,” said Shailesh Raikundlia, an analyst at Espirito Santo Investment Bank in London who recommends buying the shares. “The dividends are higher by about 2 percent compared to what we were going for and what the markets were going for.” Standard Chartered’s pay reductions contrast with Barclays Plc, whose shares slid on Feb. 11 after CEO Antony Jenkins said employee bonuses rose to 2.4 billion pounds last year from 2.17 billion pounds a year earlier. HSBC Holdings Plc, Europe’s largest lender, increased bonuses to 2.4 billion pounds from 2.2 billion pounds.

Suspended Target

Korean income from consumer banking fell 12 percent, while the firm’s business in the country lost $12 million excluding the impairment charge. Sands last year suspended a target for revenue growth of at least 10 percent after the Korean writedown, which was prompted by an increase in loan impairments related to the country’s personal debt rehabilitation plan. “We are continuing to take action on our most underperforming or problematic businesses, above allKorea,” Sands said in the statement. The lender said in January that it’s merging its consumer and corporate-banking business to cut costs, as Finance Director Richard Meddings said he would leave and the head of corporate banking, Mike Rees, was named deputy CEO. Sands and Rees will lead a bank facing rising regulatory costs after it was fined $667 million by the U.S. in 2012 for breaches of U.S. sanctions on Iran. Meddings and Steve Bertamini head of the consumer-banking unit that oversaw the Korean business, will step down from the board and leave the company in the first half. Corporate and consumer banking will be integrated and organized into three segments -- corporate and institutional clients, commercial and private-banking clients and retail customers. Corporate and institutional clients accounted for about 60 percent of the group’s 2012 revenue. Sands said on Nov. 11 that the lender will review its businesses to cut back or withdraw from less profitable markets. The bank has said it’s looking at options to divest it consumer-banking business in Lebanon and plans to sell its Geneva-based private bank. Source :  http://www.bloomberg.com/news/2014-03-05/standard-chartered-profit-falls-first-time-in-decade-on-korea.html