StanC profit down 37% in first half on currency fluctuations

The British bank Standard Chartered said on Wednesday that its profit declined 37 per cent in the first half of the year, as the lender reshapes its business under the leadership of William T Winters, its new chief executive.

The bank, which generates most of its earnings in Asia, said that its first-half results were hurt by currency fluctuations, exits from several businesses and lower valuations on loans. The bank also said that it was cutting its dividend to bolster capital.

Winters, the former head of JPMorgan Chase's investment bank, was brought in this year to replace Peter Sands, the bank's longtime chief executive, and announced plans in July to realign the bank's management structure.

Winters said the bank "still has real challenges: We are working through a legacy of a focus on growth over risk discipline and returns together with an ongoing emerging markets slowdown."

"We have also been too slow to take hard decisions, whether those are on costs, people or strategy," he said on a conference call with journalists.

"The more I see of the group, the more I see of its potential," he added. "Although emerging markets are under some pressure, but there is no question that they represent a huge long-term opportunity."

Standard Chartered said it would halve its interim dividend this year to 14.4 cents a share. "The board is acutely aware of the importance of the dividend to our shareholders, but it is equally critical that the dividend is set at a level which is sustainable and reflects the current lower earnings expectations of the group," John W Peace, the Standard Chartered chairman, said in a news release.

Winters became chief executive in June, and Peace is expected to leave the company next year. Three longstanding directors will also step down this year as the bank shrinks its board to 14 members.

In July, Winters said that the bank would streamline its business to three main divisions - corporate and investment banking, commercial and private banking, and retail banking - and that the management team would report directly to him.

On Wednesday, Standard Chartered announced another management change, appointing Mark Smith of HSBC as its new chief risk officer, beginning in January. Smith, 53, is the chief risk officer for Europe, the Middle East and Africa at HSBC's banking unit, and he serves as the global head for wholesale credit and traded risk.

Standard Chartered has faced increased regulatory scrutiny in the United States in recent years over its monitoring of suspicious transactions, and it has paid hundreds of millions of dollars in fines.

In the first half, its regulatory costs increased 60 per cent to $453 million, as the company hired additional staff members in its compliance division and increased efforts in identifying financial crimes.

The company said that the size of its staff in that area had increased fivefold in the past three years.

The bank reported a profit of $1.46 billion for the six months ended June 30, compared with $2.31 billion in the first half of 2014. On a pretax basis, profit declined 36 per cent to $2.1 billion.

The bank's operating income, which is similar to revenue in the US, declined 8 per cent to $8.5 billion in the first half, from $9.27 billion. Operating expenses declined 1 per cent to $5.04 billion, from $5.08 billion in the first half of 2014.

Standard Chartered is targeting cost cuts of $1.8 billion over the next three years, including $400 million in savings this year.

The lender said that it had reduced its work force by 5 per cent, or about 5,000 jobs, since the end of 2014.

Impairments for loans and other credit risks nearly doubled to $1.65 billion in the first half, from $846 million in the first half of last year, the bank said.

Standard Chartered has been hit hard in recent quarters by impairments for bad loans and by what it has called "challenging" trading conditions in some business lines, including currency hedging products.

©2015 The New York Times News Service