HONG KONG. —Bill Winters took more “painful” steps to turn around Standard Chartered as the bank posted its first annual loss since 1989.
The shares fell. The Asia-focused lender reported a pretax loss of $1,5 billion in 2015, down from profit of $4,2 billion a year earlier, as revenue missed estimates and loan impairments almost doubled to the highest in the bank’s history.
The bank wrote down the value of its business in Thailand, said it was reviewing its operations in Indonesia, further cut its commodity exposure and eliminated all executives’ bonuses.
“Our 2015 performance was poor, and in many ways unacceptable with the drop in income precipitous,” Winters, the company’s chief executive officer said on a call with reporters yesterday. “2016 will be another difficult year, no doubt.”
Winters (54) is attempting to unwind the damage caused by predecessor Peter Sands’ revenue-led expansion across emerging markets, which left the bank riddled with bad loans when the commodity market crashed and growth stalled from China to India. The company set a target of a 10 percent return on equity by 2020, up from this year’s 0,4 percent.
“The results were never going to be good, I’m afraid,” said Hugh Young, Asia managing director of Aberdeen Asset Management, which is Standard Chartered’s second-largest stakeholder. “The most important point is whether Bill and team are doing the right things and tidying up and whether there’s a decent business left at the end of it. I think the answer to both is in the affirmative.”
Revenue declined 15 percent to $15,4 billion, falling short of analysts’ estimates of $15,9 billion in a Bloomberg survey. Loan impairments jumped to $4 billion from $2,1 billion in 2014. When executives look at the 2015 results, it “rips at our souls,” Winters said on a call with analysts.
The bank took a $1,8 billion restructuring charge, part of the $3 billion in such charges it flagged in November. That included a writedown of about $1 billion of a portfolio it’s deemed too risky and seeking to sell in order to shed $20 billion of risk-weighted assets. Standard Chartered will “continue to take necessary, sometimes painful steps to improve returns,” the company said in a presentation to investors.
The bank is “in discussions” regarding its presence in Indonesia as the government changes regulations on foreign-owned lenders in the country, Winters said.
The company recorded a $126 million goodwill impairment on its operations in Thailand, cut its exposure to China, and said it’s continuing to restructure Korea, where returns “remain challenging.” Regulatory costs climbed 40 percent to $1,01 billion.
Excluding some one-time items, pretax profit was $834 million. That fell short of the average estimate for profit of $1,37 billion from 20 analysts surveyed by Bloomberg.
Standard Chartered said its common equity Tier 1 capital ratio, a measure of financial strength, fell to 12,6 percent from 13,1 percent as of September 30.
Since June, Winters has raised $5,1 billion from investors, scrapped the dividend and announced plans to cut 15 000 jobs to help save $2,9 billion by 2018, while seeking to restructure or exit $100 billion of risky assets. —BLOOMBERG