StanChart aiming for US$700 million in cost cuts by 2021

The Standard Chartered logo is displayed atop the Standard Chartered Wealth Management Centre, foreground, as Two International Finance Centre (IFC) stands in Hong Kong, China. (Bloomberg pic)

HONG KONG: Standard Chartered Chief Executive Officer Bill Winters announced plans to reduce costs and improve profitability, as he tries to move the firm beyond a period marked by a weak balance sheet and a series of regulatory penalties.

The bank aims to cut US$700 million in costs as part of a new three-year plan that the emerging markets focused-lender hopes will soothe investor concerns over its lacklustre returns.

In an interview with Bloomberg Television on Tuesday, Winters said that after three years of cleaning up Standard Chartered, his focus was raising return on equity to 10% by 2021, double last year’s level.

“I feel like we’re through the really hard restructuring that we needed to do to get the bank clean,” he said.

“But we know we have to take the next step to complete our journey to a 10%-plus return.”

Investors welcomed the news, with the Hong Kong-listed shares trading up 2.3% at 3.33pm local time.

The reaction will be a boost to Winters, who’s been trying to show that he can revive longer-term earnings growth, though success will in part depend on how well he restructures operations in four countries across Asia and the Middle East.

Earlier, Standard Chartered said underlying pretax profit in 2018 was up 28% US$3.86 billion, compared with a US$3.98 billion consensus forecast compiled by the bank.

Full-year underlying operating income rose 5% to US$14.97 billion, compared with forecasts of US$15.02 billion.

The firm’s private banking unit reported an underlying pretax loss of US$14 million in 2018, compared with a loss of US$1 million in the previous year.

Standard Chartered plans to “eliminate residual drags on returns from low-returning markets,” including India, South Korea, the United Arab Emirates and Indonesia, it said.

Winters didn’t provide many details about his plan for those markets, but said that it could include partnering with technology and e-commerce firms for retail banking.

The joint venture investment in PT Bank Permata is no longer considered core, the bank said in its statement, signaling Winters may be getting ready to dispose of the stake.

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

The US Justice Department extended a long-running agreement with Standard Chartered over allegations that the bank illegally processed transactions on behalf of Iran, giving the lender another three months under an outside monitor in December.