StanChart to raise $5.1 bn, exit $100-bn assets

Bill Winters struggles to revive a lender that halved in value over the past 2 years

Standard Chartered Plc said it will cut 15,000 jobs and raise £3.3 billion ($5.1 billion) in a rights issue as Chief Executive Officer Bill Winters struggles to revive a lender that halved in value over the past two years.

The bank pledged a "cost rationalisation" of $2.9 billion by 2018 and will restructure or exit $100 billion of assets, according to a statement on Tuesday. Standard Chartered's shares plunged as much as 6.2 per cent in Hong Kong after the announcement, extending this year's decline to 31 per cent.

The moves came as the London-based bank posted an unexpected quarterly loss and ahead of the publication next month of British regulators' bank stress tests. The bank, which generates most of its revenue in Asia, said it has been hurt by China's slowdown and slumping commodity prices.

"The business environment in our markets remains challenging and our recent performance is disappointing," Winters, 54, said in a statement. The 15,000-job reduction, called part of a "simplified" structure, is on a gross basis. Besides strengthening the bank's balance sheet, the capital raising will help to fund a planned $3 billion investment over three years into "strategic opportunities," technology and upgrading regulatory and compliance systems, the lender said.

The two-for-seven rights issue offered at 465 pence per share will boost the lender's common-equity Tier-1 capital ratio to 13.1 per cent from 11.5 per cent as of June 30, the bank said. Largest shareholder Temasek Holdings Pte intends to take up rights for 15.8 per cent of existing share capital, the bank said.

The pretax loss of $139 million for the third quarter compared with a $1.53 billion profit a year earlier, the bank said in a statement. The average of five analyst estimates compiled by Bloomberg was for a $903 million profit.

A rights issue had been "only a matter of time," said Andrew Clarke, director of trading at Hong Kong brokerage Mirabaud Asia Ltd., adding that the lender had "far too many issues that it still needed to resolve.

Standard Chartered said its targets now were for a 10 per cent return on equity and a common-equity Tier-1 capital ratio of 12 per cent to 13 per cent.

Impairment losses rose 129 per cent from a year earlier to $1.23 billion, with the bank citing exposures to India and commodities. Raul Sinha, an analyst at JPMorgan Chase & Co. with an overweight rating on the stock, had forecast impairments at $831 million, adding to $1.7 billion of loan losses in the first half.

The bank's stock has declined 26 per cent in London this year.