3rd November 2015
Standard Chartered is to cut 15,000 jobs by 2018 as part of a restructure as it posted disappointing third quarter results.
The Asia-focussed bank is launching a £3.3bn rights issue to strengthen its capital ratio and reinforce its balance sheet.
The news came as it posted a pre-tax loss of $139m for the third quarter, down from a $1.5bn profit at the same time last year.
It also announced that it would be investing more than $3bn over the next three years into strategic opportunities, delivering new technology, and upgrading regulatory systems.
It says it will be identifying $100bn of assets to restructure or exit and cutting $2.9bn in costs by 2018.
Its shares were down more than 10% to 639p in morning trade.
Bill Winters, group chief executive, says: “The business environment in our markets remains challenging and our recent performance is disappointing. Today we have announced a strategy that makes big changes to how we will manage ourselves going forward. We are positioning the Group for improved return on equity on a strengthened capital base. We will execute as quickly as possible to get through this transition phase, start delivering improved performance, and ensure our people are focused on providing value to our clients across Asia, Africa and the Middle East.”
Ian Forrest, Investment Research Analyst at The Share Centre, explains what it means for investors: “Banking group Standard Chartered announced this morning that it plans to raise £3.3bn from a rights issue, as slowing growth in emerging market economies weigh on its performance. This news came alongside disappointing third quarter results which suffered from loan impairments.
“Interested investors should note that the group is also launching a significant restructuring of the business, including plans to cut 15,000 jobs and find cost savings of $2.9bn. Assets with a value of around $100bn will also be reassessed with a view to selling or altering them. Furthermore, the bank has decided not to pay a final dividend and will use part of the proceeds from the rights issue to support capital adequacy levels, as well as upgrading systems and funding strategic opportunities.
“There’s every chance of continued turbulence for Standard Chartered in the short term, but for investors prepared to back the new management, we would suggest a long term ‘hold’. Any turnaround is likely to be slow so other investors should stay on the side lines.
“For those interested in the banking sector, our preferred stock is HSBC. The group also has significant operations in emerging markets but yesterday reported results ahead of expectations. Moreover, the company has already set about tackling the challenges it faces in the region.”