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Shares of Standard Chartered slumped heavily on Tuesday after the Asia-focussed bank reported a loss of $1.5 billion for 2015 — its first since 1989 — as it was hit by a rise in bad loans, impairment and restructuring charges, as well as sharp drop in revenues.
The bank’s shares were down over 5 per cent in London late Tuesday morning, after it posted the larger-than-expected loss, which came after a $4.2-billion profit the year before, as the bank took a $1.8-billion restructuring charge and set aside $4 billion for bad loans. Some of the loan impairment charges were attributed to deteriorating financial markets in India.
Excluding loan impairments and restructuring charges, operating profits were down 84 per cent to $800 million, while revenues slumped 15 per cent — a worse-than-expected performance. “The revenue performance is particularly worrying, given that we think this should drive long-term valuation of the franchise once impairments reduce,” said analysts at Deutsche Bank in a note to clients.
Describing the year’s performance as “poor” CEO Bill Winters said that the capital raising undertaken in 2015 (including $5.1 billion in December) had left the bank in a good position to weather the tough macroeconomic environment. “We have a balance sheet that is resilient and we are in the right markets. We have identified our risk issues, and we are dealing with them assertively.” However, the financial performance of the bank would remain “subdued” in 2016, he said.
Standard Chartered shares have fallen sharply since the start of the year, over concerns about its exposure to commodity prices, and the slowdown in China, despite changes and new momentum brought in under Winters, the former co-head of investment banking at JP Morgan who took over as CEO in May last year.
The bank cut costs by $600 million in 2015, and is targeting a further reduction of $2.3 billion over the next three years, through a reduction in headcount (7,000 jobs were cut in 2015, and a further 2,000 are set to go) and exiting $20 billion of riskier assets.
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