StanChart takes hit from loan provisions, challenging markets
Emerging markets-focused lender Standard Chartered was rocked by rising loan impairments at its Corporate and Institutional and Commercial Clients unit and asset disposals last year.
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The challenging market environment and the need to de-risk its balance sheet added to the bank’s woes, StanChart said in a regulatory statement on Wednesday morning.
However, the bank's capital buffers held up better than expected by some analysts. So-called Tier1 Common Equity ended the year at 10.7%, down from the 11.2% ratio achieved in 2013.
Last year, StanChart issued three profit warnings after being hit by rising costs and slump in its investment banking unit as economic growth in its key markets faltered.
All of the above contributed to a 2% decline in income last year to reach $18.23bn, while profit before tax was sent spiralling lower by 25% to hit $5.2bn.
Impairment losses on loans and advances, together with other credit risk provisions, increased 32% to $2.14bn.
To address the situation StanChart recently announced “significant” changes to its top ranks. On 26 February the bank said its chief executive officer , Peter Sands, would be stepping down in June. He will be followed next year by the chairman, John Peace. The long serving chief of its Asian arm, Jaspal Bindra, is also set to depart, alongside three long-serving independent non-executives.
On the financial side of things, it is targeting $1.8bn in cost savings over the coming three years and a return on equity of 10% in the “medium-term”.
Another one of the goals which it has set for itself is to reach a capital cushion, or Tier-1 common equity (CET1) ratio, of 11-12% in 2015 and thereafter. To achieve that it is looking to implement between $25bn-$30bn in risk- weighted assets savings over the next two years.
Full-year dividend was maintained at 86 cents, the same level as in 2013. Normalised earnings per share were off by 28% to $1.46 from the $2.04 reached last year.
As of 08:39 shares of StanChart were higher by 4.19% to 1,015p.